Debt of productivity
When the word debts comes in, many people run away. I am not a fan of it or should I say, I used to not be a fan of it. As one grows so also does your mentality expand. I have read several entrepreneurial books and these big guys grew big by taking advantage of the loan/debt system. "The difference between the same thing is how it is done"---Dani-EL. The history of debts mostly surprises me. One of the questions I get to ask is who is the last creditor on the chain. Big businesses are using Other People's Money to do business through bank loans.
On the other hand, governments and nations are even in debt. Currently, the US debt has risen to up to $36 trillion with an expected continuous rise. It is the question of how? There is this saying, 'debt is normal, it is part of a global economy'. Governments always have projects to fund, urgent help and intervention programs to look into. It is from here they stretch hands for support from other governments, corporations and even well to do individuals.
Currently, the global debt is at nearly $370 trillion with the three parties of government, business and households making up the fold. Will the world ever run out of debt? I don't think so, it is left for you to figure out which side of the debt you are likely involved in; debts of burdens or debts of productivity. Without a full understanding of what 'currency' means you are likely to continually misuse it. Many take out loans for expensive vacations, food bills, clothings and such related lavish lifestyles.
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So also do some nations, they stretch out to get uninvestable loans. No strategy of a payback, putting the entire country's economy in a hole of debt. In the long run, what the citizens experience is inflation and currency devaluation. So what becomes their next step?, a further loan to salvage the older situation with still the same pattern or being 'non-invested'.
Businesses too fall into this trap. How often do many businesses go bankrupt because they don't understand that every loan taken indebts the company and the need for a strategy to pay back or even get a much higher loan for expansion is very necessary. If you lock up currency as a business, you will pay the penalties in the long run. Many go into debts to start a business without any strategy or experience. Without having a wheel that regenerates money, never run into debt loans.
Personally, I had to make this clear with my business partner, there are loans or debt we can't risk ourselves currently because our flywheel is still in the process. Debt is not bad, why you are in it may be bad. You took a $1000 dollar debt to buy a machine that is not too relevant to your business and have to pay back $1300 dollars maybe in three months. After three months, you found out that money up to $100 dollars could not be raised with it. There was absolutely no customer base for that.
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The story can be different for another business who saw the demand and made strategic studies to understand that they will be able to make not less than $300 monthly should they purchase this or that through loans. At least they have $900 in three months and could salvage such loan terms and cover up within the next three months.
So what's the essence of this article? To correct our mentally concerning debts. train yourself not to enter into unproductive debts. Any debt that does not go into investment (strategized one) is a high risk. If you are taking a loan, understand that money is 'a currency', and current is known to flow. Is debt good? Ask multimillionaires and billionaires and they will tell you how they got there. It is not their money but definitely it was their mindset and understanding.
To conclude, let me add, many lack the understanding of money mystery. Maybe the problem is not actually that you are in debt but rather because you are in a bad debt. As I earlier said, governments are also owing, while some use it to grow their economy, others have used it to inflict more economic damage. Same also with individuals and business, bad debts are debts without any positive returns on debt. Any one planning to enter into debt must be productive.
Posted Using INLEO