The short answer is it depends.
It depends on what it is for and how it is intended to be paid back.
There is a difference between personal debt and business debt.
Personal debt often is used to acquire things we don't have the means to pay for. Effective business debt is used to acquire productive assets that will pay for themselves.
Effective use of sound business debt can help us more rapidly grow our business.
Unsound borrowing can crush our business, we need to be able to work out if this specific borrowing is sound and wise or reckless and foolhardy.
There are 4 questions we should ask when it comes to borrowing:
- Right reason
- Right time
- Right terms
- Right amount
It's beneficial to take some time to ponder these.
What are your thoughts on College debt. For me that's very painful, like just imagine you took like $50k for your college fee and now when you graduate, you already have a loan to pay so now you can't think of doing anything exceptional or taking risks becasue you have to pay that loan every month and you simply go for job. When you are down for like 20 years in your job then you realize what has happened to me.
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College debts. Not always easy to be in that fixed 'hole' of paying back for several months.
I agree with you that it becomes difficult to do any exceptional thing or take risks.
In fact, several people are beginning to think to go to Colege (with the idea of College debt) isn't worth it. People now do 6 months courses in a specialized field and they are able to make life awesome for themselves and others.
I feel it is crucial for all of us to start rtethinkign what Edyucation reallymeans and how we can use it to achieve our awesome dreams rather than keep us in a trap that we culdn't avoid.
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Yes, that's true and this is one of the reasons we come accross people saying that current College/University system sucks.
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College debt can be tricky especially where the job market is tight. After you graduate, you have a huge debt and you are jobless.
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College loans can be very useful if taken out with a strategy. The best strategy, in my opinion, is to network like crazy in college so that you already have established ties in your desired field once you graduate. This way, you have a potentially secured job after graduation. Too many people graduate with debt and they have no way of paying them back because it takes too long for them to have a steady income. Secure your job prior to graduation and you'll be okay.
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That's quite possible and the smartest way to do otherwise you will be complaining about it your whole life.
I am saying this because I have seen it and I was like this is just insane.
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borrowing is good only for good investments
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There's nothing intrinsically wrong with being in debt. Companies will borrow if they think their return on capital will be higher than the interest rate they pay to borrow the money.
E.g. if a company like Wal-Mart has to pay 0.5% interest to borrow money, that's fine if they think they can take that money and invest it in a project that returns 2% over the same span of time. Then that's a good use of someone else's money.
Or if you take out a mortgage and buy a house and the interest rate on the mortgage is 5%. That might sound like a lot, but if the value of the home appreciates more than that amount per year, then you've got a good deal and you'll make more money in the end (and plus have a home to live in).
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Borrowing is neither bad nor is it good. But the major thing we should look out for is person involved. Some persons borrow to meet up need with a good intention that after some time they would pay back while others use borrowing as a lifestyle they borrow from a friend today then by tommorow when they have not even paid that debt to go to another person,this is when borrowing becomes a big crime.
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Too many people are afraid of accumulating debt. In some cases, it's actually extremely beneficial. In terms of real estate investments, you can take out a loan to buy a house, fix up the house, and then sell it for markup. Use the sell earnings to pay off the loan and keep the profits. This strategy uses none of your own capital, only the lender's. So much leverage involved that more people should take advantage.
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yup, it's all about how you use it. For a while we were getting 0% credit cards, that is free money so its foolish not to take it, as long as you can pay it back on time. Better to spend someone else's money so that I can invest my money at a positive rate of return.
The other case has to do with the productive assets we were discussing the other day, buying such things on credit makes a lot of sense. The largest corporations and wealthiest individuals all acquire debt for these reasons.
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The trick is to not borrow. haven't had an account for years now. I know when you are young you need accounts for credit ratings etc. If you have a credit card pay it back within 30 to 60 days otherwise you will just add to it.
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Borrowing is not bad when you talk about personally or in business, you can borrow for personal reasons doesn't mean that you won't pay back because as long as you have something doing you can pay back, for business purposes it's advisable to borrow what you know you can pay back depending on the project or business at hand, if you borrow more than what your business can generate you may end up paying with your capital
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Exactly. Borrow it but don't get too comfortable borrowing.
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Yes. Kiyosaki points it out at best. There are two kinds of debt. The good ones and the bad ones.
A good debts is to get assets
A bad debts is to acquire liabilities
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That's right @apollo
I am reading Kiyosaki book presently "You can choose to be rich" and I agree with you on this.
Borrow to invest in real assets (that brings income to you), not just some form of perceived assets that takes money from you.
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yes it is good whe you have a plan. But some people taking debt for gaming or for buying shitty things like an iphone,Ipad. You must be careful before doing it
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This great post i appreciate your post best of luck...
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Thank you for sharing @sme. Im very heppy and good job
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I read, saw, enjoyed your post, nice and innovative. Thanks for sharing post.
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Most businesses today are flourishing due to debts which they acquired to establish a firm financial condition.
So it is quite ok to be in debt, but it should have a limit in order to prevent bankruptcy
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your post I think is very useful for business. we wait for your next post.
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Can I borrow steem to power up my account?
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Borrowing is bad except when for a business. That could be my general rule of thumb.
But to be honest, most thigs that we cant afford come under the category of luxury or un necessary, unless its one of the basic human needs of food shelter security and medicine. So perosnal loans in my opinion are for things that we dont need mostly. Modesty is always more peaceful. And the extra money, if un necessary could always help someone in need. There are too many people in the world fitting that criteria.
Business loan however are a smart idea. In general. As you are not using all of your money but still reaping the maximum benefits, although the reward could be a little lesser than if it were all your money. But the investement to profit ratio would still be greater.
Nice piece though. A very comprehensive and simple way to differentiate 2 main types of borrowing. Good work.
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What would you give as a solution to someone who owes you and has refused to pay?
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Borrowing can a be problem if you misuse the borrowing. For example if borrow to buy a productive asset for your business and you then use the funds to buy a luxury car.
For personal borrowing, you must borrow only when you can comfortably pay back from your income. Don't borrow just because you want to keep up with your neighbours or to support an artificial lifestyle. You will eventually drown in debt.
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Without debt you can’t leverage investments
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See borrowing is important. I realized business is all about rotating money so you really need the investment flowing. What's important here is how comfortable you get with that debt.
Too much comfort will put you to a mindframe you'll regret in long term or when u start evaluating the interest money
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What an precise but insightful post. @sme thanks for sharing
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Thanks for this post dear @sme
Here's how I understand it:
Now that you've got $108, can you now (2) lend me half (4) in order to increase my visibility (1)? I'm serious. What do you think (3)?
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It all depends on the purpose for borrowing, timing also matters. You must know the terms n conditions you are getting into. If your reasons are genuine and justifiable and the t n c arent too strigent then you can
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