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Old 07-05-2013, 09:03 AM
32vld 32vld is offline
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How much debt is safe to carry?

How much debt is safe go carry?

New truck costing $600 a month. Making $6,000 month.

I would guess that if business dropped ten percent. I would continue to guess that the truck payments could still be made.

At what point is holding on to too much debt?
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Old 07-05-2013, 09:22 AM
Pierre2013 Pierre2013 is offline
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A better way to look at it is; how many months could you go with zero income and still be fine? That's the way I have always approached life.

If you can have 12-18 months of saving, then you are fine and have plenty of time to react to almost anything that could happen to you. Just my 2 cents.
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Old 07-05-2013, 06:57 PM
seabee24 seabee24 is offline
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A better way to look at it is; how many months could you go with zero income and still be fine? That's the way I have always approached life.

If you can have 12-18 months of saving, then you are fine and have plenty of time to react to almost anything that could happen to you. Just my 2 cents.

That's how I would do it after making a ton of mistakes and learning. If you are taking on debt like a truck payment I would ask myself the following.

1. Is there any other method of getting the same thing? Can I buy used and still have good results?

2. If I purchased it today, and took a hit, had to sell it tomorrow, can I pay it off the note knowing I will loose 30% the day it's purchased

3. Can I stop all operations, stop working, and make all my current fixed payments plus this new one?

4 do I really need it?


If you can answer yes to at least 3 of these, and your currently profitable, have savings, Then yes I would buy it.

In my mind- bad debt is when you can't afford it. You think you need it, must have it, but you can't afford it, and would be screwed on the re-sale

Good debt- you have the money to pay for it cash or most of it cash but rather than clearing out your bank accounts for the purchase to leave you with liquid funds to spare which can be used for other savings in business like bulk discounts, or time/labor saving tactics.
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Old 07-05-2013, 07:56 PM
larryinalabama larryinalabama is online now
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Originally Posted by seabee24 View Post
Good debt- you have the money to pay for it cash or most of it cash but rather than clearing out your bank accounts for the purchase to leave you with liquid funds to spare which can be used for other savings in business like bulk discounts, or time/labor saving tactics.
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Good debt is what your compedators have.

In reality there is no good debt in this business, debt increases your risk of failure, debt is expensive, and debt on a asset that is going down in value is extremely expensive.

Too me a lawn mower payment doesn't even sound right.
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Old 07-05-2013, 08:01 PM
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JB1 JB1 is online now
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Originally Posted by larryinalabama View Post
Good debt is what your compedators have.

In reality there is no good debt in this business, debt increases your risk of failure, debt is expensive, and debt on a asset that is going down in value is extremely expensive.

Too me a lawn mower payment doesn't even sound right.

neither does a house or anything else then according to your logic.
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Old 07-05-2013, 08:33 PM
larryinalabama larryinalabama is online now
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neither does a house or anything else then according to your logic.
A house or "realestate" in general is an asset that goes up in value, a truck or lawnmower is an asset that will almost alaways go down in value.

If you need to have a home mortgague it may or may not be better than paying rent. If you choose to borrow make darn sure its something you can easily afford and pay off in 7 to 10 years.

I used to leverage some realestate. I never borrowed on any deal that wasn't 60% instant equity. Even those deals are long term and its a real tough business. Cash is alaways better, it save a whole lot of money in fees as well as interest, and keep the properties 100% in your control.
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Old 07-06-2013, 02:51 PM
seabee24 seabee24 is offline
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Originally Posted by larryinalabama View Post
Good debt is what your compedators have.

In reality there is no good debt in this business, debt increases your risk of failure, debt is expensive, and debt on a asset that is going down in value is extremely expensive.

Too me a lawn mower payment doesn't even sound right.
Depends on your situation. So if you had 10,000 and not a penny more to your name, and you needed a new Ztr to the tune of 9k. You would pay cash? I would take the zero percent interest option on 24 months, then take my 10k and invest it in bulk savings or efficiency savings or heck put it in a CD an earn a small amount of interest.

That's n example of good debt. You could buy a used mower, but you would have to way the pro and cons.
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Old 07-06-2013, 03:19 PM
larryinalabama larryinalabama is online now
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Originally Posted by seabee24 View Post
Depends on your situation. So if you had 10,000 and not a penny more to your name, and you needed a new Ztr to the tune of 9k. You would pay cash? I would take the zero percent interest option on 24 months, then take my 10k and invest it in bulk savings or efficiency savings or heck put it in a CD an earn a small amount of interest.

That's n example of good debt. You could buy a used mower, but you would have to way the pro and cons.
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Good example of how "broke" people operate.
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Old 07-05-2013, 08:57 PM
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Efficiency Efficiency is offline
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Originally Posted by seabee24 View Post
3. Can I stop all operations, stop working, and make all my current fixed payments plus this new
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WTH? That question isnt even logical. if you stop operations, you will next liquidate all assets, pay off any associated notes, and problem solved, assumimg you dont sell operations and assets as a whole (massively prefered/advised)
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Old 07-06-2013, 03:36 PM
seabee24 seabee24 is offline
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WTH? That question isnt even logical. if you stop operations, you will next liquidate all assets, pay off any associated notes, and problem solved, assumimg you dont sell operations and assets as a whole (massively prefered/advised)
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Ok I'll re-phase it. If something happened, and the money stopped coming in for any reason, could you make the payments and ride out the storm until the money tree bloomed again or until you could sell it off? Could be 6 months could be 2 yrs everyone is different.

Where the bad debt comes into play is when you fianance a mower and reley on the money it produces to make its own payments. If you had a dought like I had last year, could you still make the payments for 3 Months mowing less than 10% of your route? Or would you find your self in trouble quickly?
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