I advocate that everyone should be personally debt free. Leverage however (using other people’s money to make more money), is best for business practice. Leverage can be very dangerous for personal finance because you have to put up your own personal assets for collateral. Even if the debt is unsecured, your credit is at stake. And, there’s less of a way out if things go sour whereas in business finance, liquidation is usually the (last resort) saving grace to having a clean slate again without personal damage. Also in business finance, you can remove yourself from the situation generally unscathed (unless your personal reputation is on the line, or you’ve heavily invested personal funds into the venture).
Note: To avoid personal liability, you would structure your business separate from you (forming an LLC or Corporation).
A lot of people argue what kind of debt is good or bad. Personally I’ll simplify this by saying business debt is good, personal debt is bad. Now, this is a GENERAL statement. Meaning, overall, this is how I believe people should categorize debt. Personal debt can work very well for some people. Business debt can be the death of a dream for others. Moral of the story: Do your research. Then tailor your decision to you.
If I believe personal debt is bad, why do I have it? Because I got into personal debt BEFORE I did my research. I was 17 years old. And most, if not all of us are debt targets at that age. It’s called college. So, knowing what I know now (and I’m still learning), I’ve formed the opinion that college (personal debt) is not an investment. You can make elite connections and create gainful employment by working your way up for it.
Starting a blog, Youtube channel or social media community are all good, feasible ways to do this. You don’t NEED personal debt to improve your life. You need innovation. That takes creativity and personal sacrifice.
I also believe financing property for personal use is not a great investment. It’s one of those things where if you lose your job or your business, you’re still liable. This can negatively impact your relationships (spouse/partner, kids, friends), and my goal in life is to live stress free. Financing anything for personal use is not in my stress free manual.
At the end of the day: Personal debt doesn’t make you money. It just takes your money. Business debt can make you a lot of money, if you play your cards right.
Here’s my inspiration for this post: Grant Cardone on Calling Dave Ramsey “Stupid” for Saying “All Debt is Bad Debt” (Part 12)
I read a lot of the comments. That’s what gave me the spark. Feel free to share your thoughts below. I appreciate a different perspective.
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