“Never spend your money before you have it.” -Thomas Jefferson
I know you know what debt is. It’s pretty simple – it’s what you owe to someone else. You borrow, you owe. But there is another way to look at debt that may change how you think about this simple subject.
A useful definition of debt: COMMITTED FUTURE PRODUCTION.
This is perhaps the most useful definition there is for a practical person either in business or for family matters. Think about it: every time you buy on debt you are essentially swearing to another party that you will PRODUCE in the future enough of whatever you do to pay this debt off. This applies to auto loans, credit cards, mortgages, office equipment, etc. – ALL DEBT.
Debt ties up your future.
On a personal level, the more debt you have, the more of your future is tied up with your obligation to pay the debt off. When you add the interest charged, you stretch that out even further.
There are two kinds of debt:
Consumer debt can be such a huge trap. Banks and credit card companies send out all their “You’re Approved” credit card promotions and net people like a fishing trawler. Most people, with consumerism as a religious affectation, just sign right up and start charging without much more thought than – “Hey! Free money!”
Twenty years ago I had so much credit card debt that I worked almost one month per year to pay the interest. I swore to dig myself out and never do that again. Slowly but surely I bought my future back. So far, so good.
Spending, whether on credit cards, debt or cash, must be regulated by what is vital to keep you or your business alive and producing. Going deeper and deeper into debt is a bad sign.
We will continue on the subject of debt next week!
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