Would you borrow more if you could?


Seems like a strange question but if you could borrow more – would you?  Watching the news regarding the debt ceiling events unfolding in the US has me thinking about this question as it relates to individuals and businesses.  Many households hold an informal vote between spouses regarding the borrowing of money.  Many business partners will hold a vote regarding the additional of more debt to their balance sheet.  Just like the US government is trying to pass a much needed vote to raise their debt levels, it is important to remember that borrowing money means you are betting on the future or that you are spending your future today.

I remember my folks putting things they wanted on “layaway” and if they didn’t have money to do something we simply didn’t do it (for those of you who do not know what “layaway” is click here for the dictionary definition).  As a business owner you had to save your profits to make investments into growth strategies or pay for additional expenses.  Obviously mortgages and loans have always been available but somewhere over the past few decades things have really changed.  In my experience people and businesses seem to think that borrowing money is an entitlement and decisions to take on a mortgage or a loan does not require scrutiny.  Understanding that interest rates being at all time lows only reinforces the entitlement to “free money” one should still pay attention to their ability and capacity to repay money they are taking from a bank or lender.

Notwithstanding I earn my living helping people and businesses borrow money I have also experienced the downside to borrowing money from clients that have come back to me after being foreclosed on or declaring bankruptcy because their future did not work out the way they thought it would.  I muse about this topic today because I have a self imposed responsibility to make sure that I am helping people and businesses do more and am not being the foot on their head that forces them under the water line.

I have always liked this quote and thought it was appropriate for today:

“We buy things we don’t need with money we don’t have to impress people we don’t like.” – Dave Ramsey

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