Being an entrepreneur, you might have probably read before that there has been an area of good debt and bad debt. Well, that might not be the right solution for you. The entire notion of good and bad debt is completely wrong. If you truly want to know what the actual meaning of debt is, then remember that nothing comes as good debt. Well, that does not mean that there is never any good time for you to borrow money. The problem is always the confusion about the present and actual definition of this term debt. Once you have clarified in this point and the issue, it can always end up freeing your mind and allowing you to just produce on a higher level of the proper entrepreneur.
False definitions of debt can always hold you back:
Many entrepreneurs and business owners might see borrowing money to be associated with some of the big purchases like cars, homes or even starting a business as evil, even though a necessary one, as it means going right into debt supposedly. However, this form to be a dangerous philosophy as now your stated evil debt will eat at conscience. You will come to learn more about that from nationaldebtreliefprograms.com and similar sessions.
- It is more like money on the back trying to tell you constantly that you cannot feel safe or freely enjoy life until you don’t owe anything to any per Moreover, the associated stress and guilt will harm your productivity and can also close mind to the said opportunities.
- It is not hard to state that the false statements of debt have pushed you from so many directions. Let’s take one example. If you ever listen to any of the personal financial gurus on TV or books, or even in Radios, then you might have got this idea of not borrowing money at any cost.
- One such guru has even recommending paying for a house in cash and right up front, which some of the major entrepreneurs like Mark Zuckerberg did not follow. That’s how they actually detest debt. Even though these financial gurus are a bit correct about ways to avoid debt, they are also wrong as borrowing money to purchase a place does not always force you to end up in debt.
Focusing on the points even better:
Yes, it is true that the mortgage is always a liability. If you have total control of the said asset then that cannot be fully ignored at all. But, it is mandatory for you to take complete control over the assets and that should not be ignored at the same time. In case the house is worth more than the said mortgage, which is mostly the case after making a down payment, then you might catch up with the idea of equity. It is primarily the exact opposite of debt.
Real definition behind debt:
Now you must be wondering the real and amazing definition of debt. In short, it can be well stated that debt is not always about owing money. It primarily owns more than what you own. The only time when you might be in debt is true accounting sense is when the liabilities are greater than assets. It is true that you might want to avoid true debt where you have more liability count than assets, but you should not want to avoid the incurring liabilities, which is owning something to someone else.it can prove to be rather beneficial for the productivity of your source, prosperity of the company and even creating value. In some of the instances, the easiest way for you to increase wealth and prosperity is by increasing liabilities and not decreasing.
The ultimate catch:
There is a simple catch, which might force you to be concerned about borrowing bucks. Always remember that not all liabilities are created in equal ways. As per an example, if you do not have the means to eat at the luxurious restaurant right now, but you end up doing it every night and put the bill on credit, then you are going through consumptive liability.
- It might force you to dig deep right into debt and without nothing to show as when the meal gets over.
- In case the car is constantly showing some problems but it is not completely paid yet, it can be another example of consumptive liability as it affects the productivity level negatively.
- Another example might help you understand better. If you plan to buy new equity or software for business and you borrow money for that but not quite implemented it, then that is a consumptive liability.
The general rule over here is that if the liability fails to add to cash flow, then that will be the consumptive liability. You better avoid those options first.
The next stop to follow:
Then, on the other hand, it is also proven to be the best in order to secure multiple productive liabilities as you can work out on. It is because, they will always leave your place making you wealthier then you were before. Some examples of such productive liability might be small business loans, education loans, a business line of credit, collateral business loans and more.
You can also state payroll to be another finest example of productive liability. On every month possible, the business owner will end up owning employees paycheck or even two. But only assuming that employees might increase cash flow, this can prove to be a great deal. It is also another example of productive liability.
Can a mortgage be stated as productive liability:
You might have borrowed bucks to pay for the house, and yet the place might not be offering cash flow. Will it still be considered a productive liability? Before you rent the place to create cash flow, you have to realize that personal mortgage can be productive liability. If borrowing bucks to free the payment sets your house free then it is indeed the finest example of productive liability.
It is true to get these points straight and create your platform as promising as a rich entrepreneur, without worrying about debt.
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including money saving, Budgeting, business debt consolidation, business, and start-ups.