It’s fairly safe to say that Mike is NOT a fan:
I happened to stumble on this site doing some research on debt free. No wonder I’ve never heard of this site or even the radio show apparently associated with it. Anyone who thinks that living debt free is the wrong thing to do needs to have their head examined. That’s like saying Ohh we shouldnt live debt free we’re on the planet to make banks rich on our hard earned money. Nice mentality you got there. It just doesn’t hold any water. The question you should be asking yourself is would you rather live be constantly paying out your hard earned cash to banks making money off you not paying for your own assets or should you own your assets outright and control a greater portion of your hard earned cash? The choice IS obvious.
But, what of Mike’s aversion to paying the banks interest?
I look at banks a little differently to those like Mike who are averse to paying their interest, fees and charges …
… sure, I don’t like how they can mount up. And, I don’t like how the banks can make ‘super profits’ in good times and seem to get away with it. And, I don’t like those snooty tellers who look over their glasses at you, when you want to make a withdrawal, like they’re doing you some sort of favor by letting you have your money 😉
But, I can put that aside, when I realize that here is a partner who is willing to put up some – or even most (if it’s a real-estate transaction) of the capital to fund my latest entrepreneurial or investment endeavor, yet they want virtually no say in how I manage that business / investment once they have put their money in … and, I even get virtually 100% control over all of the daily management decisions and even, pretty much make the ‘sell’ decision on my own.
And, all they want is a few % per year return on the money that they put in … no share of the speculative upside!
Where else can you find a partner like that?
So, Mike, I ask you: what’s your objective?
– To get rich(er) quick(er)?
– Or is it to avoid putting any of your money into somebody else’s pocket?
I don’t mind which path you choose, as long as it gets you to your financial objective i.e. Your Number by Your Date …
… if not, you will do well in life – not just your financial life – to stop obsessing about what the other guy might be getting out of the deal, and start obsessing about what you might be getting out of that same deal 🙂
I wonder what our readers think? Tell us about your good/bad experiences with bank funding …
I would agree that some people should be debt free. Especially those who do not manage money very well. But on the flip side of that, if you know what your doing and utilize financing properly, then of course you could be far ahead of where you would be had you totally shunned debt. Not all debt is bad. I would dare say 99% of the most successful businesses in this world relied upon debt to start them. Maybe people like Mike choose to view there finances from a personal prospective instead of a business one as some do.
“Maybe people like Mike choose to view there finances from a personal prospective instead of a business one as some do.” … nice!
Thanks, Lee.
Adrian, you’ve stated it perfectly. You get to put in a small amount of your own cash, and inevitably Own a Property(that when chosen well) will bring you more of what everyone is looking for . Cash. Cash is cool. Cash is desired, and Cash helps you live the life you wish to live,so why not use their cash to help you make yours?
In addition to agreeing with everything that Adrian has said in the post and the comments from Lee and Steve, I have a more fundamental issue with the “all debt is bad and no one should every borrow” mentality.
Put simply, if no one borrowed money, investments like bonds, CDs and interest bearing bank deposits would not exist. The same people who advocate “no debt” are (often) the same people who advocate putting money into such safe low risk investments – the ones that wouldn’t exist if people didn’t borrow money. (There are a lot of other negative implications of a “no debt” world as well.)
Instead of condemning those who advocate the appropriate use of debt to achieve financial objectives (and accept the corresponding risk), it would be far more sensible to advocate the careful use of sensible levels of debt for appropriate purposes. (Sorry about all the adjectives.)
Being debt free may be a good thing for many (if not most) people – but it is not a strategy for achieving financial independence (or even home ownership).
Funny enough- I’ve never taken loan for anything since I graduated from grad school with a small student loan (Federal student loan with no interest). Interestingly enough I took the loan because I thought I could make more money off interest and pay it back without paying interest. That was my first lesson on paying for the loan origination at 5%… no free lunch as they say.
Since then I’ve never taken out a loan from a bank for my personal finances. Bought every car 100% cash, and bought my first home (condo) 100% cash back in 2005…
On the businesses I’ve run there have been bank loans but I like to get things to where cash flow is coming in and no need to take out a loan.
Unless your business is very capital intensive I’d argue that investment money should come from cash flow and not bank loans. Granted, if you want to expand quickly you need access to capital but who faces this in today’s market?
Mike Hunt (note- different Mike than the original commenter!)
@ Mike [Hunt] – Interesting observation, because I’ve actually funded my business expansion over three continents (is New Zealand a continent?!) by doing exactly what you suggest: using my own cashflow.
On the other hand:
1. I have a finance company that uses 90% borrowed money (it has to!),
2. I happily borrow 65%+ for my commercial property purchases,
3. I have zero debt on my houses ($6m+ between them).
So, I can make an argument for anywhere between 0% and 100% leverage 😛
AJC,
You are more sophisticated than me in this regard. I haven’t been able to find a deal to jump into although I’ve been pretty busy running my business to really look around.
Hopefully we can sell this and then I may have some more free time to explore…
There is a lot of great info on this blog.
-Mike
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