FP Article 2
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Borrower or Economic Slave?
by Rajen Devadason
If you would know the value of money, go try to
borrow some; for he that goes a-borrowing goes
Is it possible to live in our 21st
century and stay out of debt? Most
people would say no. Yet, there are
those who are debt-free.
But even then, is it desirable to
totally eschew or abstain from debt
when it seems as though the global
retail economy is powered by rising
levels of consumer borrowing?
To answer that question
intelligently, the first thing you
should do before you read anymore is
ask yourself whether you believe
debt is a curse or a blessing. Well?
I've found a large part of my work as a licensed
financial planner, consultant and professional
speaker revolves around urging people to
extricate themselves from the clutches of
Because of that, many people
assume I believe all debt is bad... even
downright wicked. Yet, nothing could be further
from the truth.
This is an article on understanding
the differences between good debt
and bad debt. I hope you enjoy
reading it. But if it isn't what
you're looking for, you're welcome
to search for something that better meets
your needs. Thank you for allowing
me to serve you.
In all fairness, though, I'm sure the title of
one of my books, Liberty! From Debt-Slave
to Money Master, helped entrench that
'Rajen-thinks-all-debt-is-bad' perception among
many who've heard of that book but have never
The truth is few things in life are correctly
viewed in monochrome! And debt isn't one of
Most of life involves the full spectrum of
colour and hue. That includes the emotive
subject of debt.
Just like fire, debt can be a great friend if
properly harnessed. But, also like fire, it can
scar you for life or even permanently snuff out
your breath if it is permitted to rage out of
teaches - in stories involving three young men -
principles and strategies that work well for
those who want to get out from under the
sometimes overwhelming burden of consumer debt.
In most countries, typical consumer loans are
taken on for years at a stretch to buy items
that go down in value, sometimes precipitously
during just the course of the outstanding loan!
In most cases, for most people, I believe too
much consumer debt is indicative of a
well-entrenched inability to exercise one of the
key criteria for long-term success, a commitment
to delayed gratification - the willingness to
give up something good today in anticipation of
something far better tomorrow.
Embracing a philosophy of delayed gratification
is, at least in my opinion, indicative of a
person of superior emotional intelligence.
Mature people can exercise delayed gratification
with regard to consumer items. Immature people
can't, won't or simply don't!
The dividing line often has little to do with
Yet I believe there is one type of debt that -
under the right circumstances - can be
viable business debt, although even here
intelligent restraint should be used!
In this instance, money may be borrowed, say at
10%, to engage in productive economic activities
that yield perhaps 30%, 40% or more.
The ability to do this again and again leads to
burgeoning, upward spiraling profits, which are
the cornerstone of sound, vibrant capitalism and
the goal of all self-respecting capitalists.
Still, let the record show that I vehemently
disagree with the oily character Gordon Gekko
played by Michael Douglas in the iconic 1980s
movie Wall Street. In it, Gekko
declared, "... greed, for lack of a better word,
is good. Greed is right. Greed works."
Not to my mind. Not now, not ever!
I believe unadulterated greed is cancerously
But a healthy desire for profits, as long as
they are achieved by ethical business practices
devoid of gouging others, are not merely good,
After all, the fair exchange of useful goods and
services for money is the cornerstone of a
healthy economy. For instance, a simple,
personal example where I exchange an
understanding of the principles of sound time
management for money is found at this page which
features another of my books, this one entitled
Our entire way of modern life is centred upon
the benefits of profits earned honestly.
Bernard Baruch described it best, I think, when
he wrote, "Society can progress only if men's
labour show a profit - if they yield more than
is put in. To produce at a loss must leave less
for all to share."
If you believe Baruch's statement, and I believe
it is wise to do so, then for your own sake make
it a point to sit down tonight -
there's nothing like striking while the iron is
hot - to figure out how much you owe
and to whom. Do all this figuring on a large
sheet of paper.
As you do so, 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
Then embark upon a focused programme of
debt-eradication within the second group.
For this part of the exercise, here's what I
all your debts on another, fresh sheet of paper;
Then decide whether you want to adopt one
of two great strategies:
off your debts in order of the most expensive
ones (meaning those with the highest interest
rates) first ; OR
b) Paying them
in order of the smallest ones first.
The first strategy (2a) is mathematically more
efficient, but I have found the second (2b) more
Use the first if you're super-disciplined. Use
the second if you're like most of us mere
mortals and in need of quick reinforcement
through positive feedback!
In closing, I wish you all the best in crushing
the monster of excessive consumer debt and thus
rescuing your future income streams from being
devoured by this implacable foe.
wish to consider this matter more deeply, you'll
find these additional articles helpful:
Escaping Debt Slavery
Credit Cards – Friends or Foes?
Credit Cards – Beware the Retail Therapy Trap!
Oh, and by the way, if an unhealthy level of
consumer debt is not a problem you face,
congratulations! Perhaps you can proactively
choose to 'be part of the solution, not the
problem' by actively and enthusiastically
sharing this lesson with friends and family
members who may be wrestling with excessive debt
of the wrong, consumption-based, type.
© Rajen Devadason