Comments on: Not a fan?

By: Is a fan?- 7million7years

Is a fan?- 7million7years — Thu, 17 Sep 2009 09:18:56 +0000

[...] – the one who actually seems to like my blog – makes a good point in response to the other Mike, who doesn’t: I’ve never taken out a loan from a bank for my personal [...]

By: Mike Hunt

Mike Hunt — Thu, 10 Sep 2009 02:07:02 +0000

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

By: Adrian

Adrian — Wed, 09 Sep 2009 00:45:42 +0000

@ 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

By: Mike Hunt

Mike Hunt — Tue, 08 Sep 2009 05:27:47 +0000

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!)

By: traineeinvestor

traineeinvestor — Tue, 08 Sep 2009 04:53:00 +0000

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).

By: Steve

Steve — Tue, 08 Sep 2009 02:01:33 +0000

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?

By: Adrian

Adrian — Tue, 08 Sep 2009 00:44:53 +0000

“Maybe people like Mike choose to view there finances from a personal prospective instead of a business one as some do.” … nice!

Thanks, Lee.

By: Lee

Lee — Mon, 07 Sep 2009 19:18:09 +0000

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.