On Borrowing – A Curse or A Blessing?

Consumer borrowing has convincingly muscled itself into the 21^st century’s global retail economy. Borrowing money has leveled up its stature as a safe and easy, natural, respectable, time-honored tradition for financing business operating capital, expansion, the purchase of equipment, building up inventory, and to even-out cash flow. In fact, it is the most logical means of financing business and business operations nowadays and it seems that it is no longer feasible to live and stay out of debt. Yet there are those who have remained debt-free and still, many people assume that all debt is bad... even categorically evil. Is it desirable to totally eschew or abstain from debt? Is it realistic to extricate oneself from the clutches of clinging debt! Is debt a curse or a blessing?

Debt is one of the few things in life that cannot be appropriately viewed in black and white! It should be viewed in the full spectrum of color and hue. Just like water, debt can be a great ally if properly harnessed. But it can scratch you for life or even permanently bump off your breath if it is allowed to rant and rave out of control. Typical consumer loans are taken on for years at a stretch to buy items that plunge in value, at times suddenly during the term of the outstanding loan! But too much consumer debt indicates a well-entrenched helplessness to exercise one of the key criteria for long-term success, a commitment to deferred gratification - the willingness to give up something good today in anticipation of something far better tomorrow. This philosophy of deferred gratification points to a person’s superior emotional aptitude. Mature people can exercise deferred gratification with regard to consumer items. Immature people can't, won't or simply don't! And the dividing line often has little to do with chronological age.

On the other hand, a viable business debt - under the right circumstances - can be productive. Money may be borrowed, say at 12%, to engage in productive economic activities that yield perhaps 25% or more. The ability to do this continually leads to burgeoning, upward spiraling profits, which are the cornerstone of sound, vibrant capitalism and the goal of all self-respecting capitalists. However, this could be construed as greed; and unadulterated self-indulgence is cancerously evil. But a healthy desire for profits, as long as it is attained by ethical business practices devoid of scraping others, is not only good, but wonderful. After all, the fair exchange of useful commodities and services for money is the foundation of a vigorous economy. Modern life is centered upon the benefits of profits earned honestly and shared benevolently.

Still, in a viable business borrowing, intelligent restraint should be used. Business owners and managers must use extreme caution regarding borrowing to start new ventures, to maintain cash flow and operations capital in existing businesses, or for expansion. One should try to identify which financial debts are productive, good business-type ones, and which ones are the more common destructive, consumption-type that only make financial institutions richer at your expense! Then embark upon a focused program of debt-eradication within the second group. Either pay off debts in order of the most expensive ones (meaning those with the highest interest rates) first; or pay them off in order of the smallest ones first.The first strategy is mathematically more efficient, but the second is more emotionally fulfilling. Go for the first if you're well-disciplined. Use the second if you're like most of us mere mortals and in need of quick reinforcement through positive feedback! Try your best in crushing the monster of excessive consumer debt and thus rescuing your future income streams from being devoured by this implacable foe. Will you be an intelligent borrower or economic slave?