Debt Management

The greatest failure of our fiat currency and fractional reserve banking system is that many individuals are living well beyond their means.  We live in a period of history that is as financially leveraged as there has ever been.  We do not expect it to end well.

That does not mean that individuals cannot fare well moving forward if they have proper plans, discipline and do not fall prey to a system that is not designed for them.

There is good debt and there is bad debt. Today, people are entering into more bad debt situations than ever before. Interest rates are so low and lenders are willing to lend, so in the end individuals enter borrowing contracts that they never should. We live in times where materialism is a core part of our existence. The first thing that individuals must control is their emotional connection to material things and their own perceived value and what creates happiness.There is nothing wrong with ‘things’ but if you cannot afford it, do not buy it.  This is not a ramble on simplicity or balance but purely a statement on the importance of fiscally sound strategies.

Too much non productive debt has proven to get many people in trouble. Some of the most productive areas of debt (good debt) include home mortgages and borrowing for a business.

In both cases, you may lose some or all of the money you borrowed but there is a potential for gains, sometimes huge gains. Borrowing for a car and most credit card purchases will provide no upside. Yes, we need cars and things but it is working within your means that is the key. I have worked with some of the wealthiest people out there, and most did not utilize debt to any great extent, even during their humble beginnings. There is a balance here that one must find, but do not expect your financial institutions to help you here. They love collecting 5 to 20% interest….a very profitable business. Building wealth requires discipline and this is one of those areas that discipline is key.