Is Debt a Good Idea?

Borrowing is not always a bad thing. Sometimes it is the only way to make a business venture successful. However, there is a large majority of the population that rings up huge bills that will take years to repay, if ever. They want to buy that new sports car or that new smartphone that they’ve always wanted. However, if we really look at things from a realistic standpoint, we can discover two major points. Number one, they can live without these things (unless under certain circumstances). Number two, these items will depreciate over the years, in which case, you will not be able to make your money back if you sell it. Land, for instance, probably won’t depreciate unless a town just gets abandoned or something of that nature. This is actually a good business to get into if you can find land cheap that won’t take long to fix up. If you don’t have the money to buy some real estate, I recommend borrowing money from an individual with the agreement of no interest. If this is not possible, at least find renters that will pay enough to pay the interest and/or debt in a suitable amount of time. Make sure you have the individual or bank sign a contract so there is no sneaky business a few months down the road.

A very good book about investing is George Clason’s book The Richest Man in Babylon. The point is clearly stated that you should pay back your debts as quickly as you can. “If thou contentedly let the years slip by and make no effort to repay, then thou hast but the contemptible soul of a slave. No man is otherwise who cannot respect himself, and no man can respect himself who does not repay honest debts.” In Chapter VII (“The Clay Tablets From Babylon”), Clason gives some good advice on the best way to get out of debt if you fall to the misfortune of not being able to pay it off. One of the first things he says to do is to apologize to your money lenders for not paying it off on time and then tell them your plan of repayment. The plan prescribed in the book is to take two tenths of everything you earn and send it to your lenders, as soon as you make it. Don’t let this money get put into your bank account or you will end up spending it.

As you can see debt is not necessarily a bad thing, but it should not be taken lightly. However, the main idea is if you have to go into debt, have a repayment plan (and possibly a Plan B) already thought out before you get under someone else’s thumb. If at all possible, never get into debt in the first place. Use the power of compound interest and investment to raise the money for trying your hand in the world of business.

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