How much debt is safe to carry?

Discussion in 'Business Operations' started by 32vld, Jul 5, 2013.

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  1. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,434

    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.
     

  2. neither does a house or anything else then according to your logic.
     
  3. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,434

    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.
     
  4. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,536

    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)
    Posted via Mobile Device
     
  5. vegandude

    vegandude LawnSite Senior Member
    Posts: 450

    How much per month can you pay your bank account to save up for it, or is it a immediate need? I don't know if your solo or not but, one injury can screw you over. NO DEBT. NO DEBT. NO DEBT.
     
  6. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    I am not buying a truck. The numbers were an example to start a discussion. The thread is not about how much to spend on a truck.
     
  7. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    I am not buying a truck. The numbers were an example to start a discussion. The thread is not about how much to spend on a truck.

    I prefer saving and then buying with cash.

    Though I could see one being caught with not enough money to make a major purchase such as a truck or even a major repair such as a blown transmission. Yes there are always options. Buy a new truck or just drop in a new motor into your current one is one example.
     
  8. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    I am 59, and I am paying off a mortgage. Out side of that I do not want to take on any more debt.

    At 59 I do not have the income and financial security to take on loans even for a car or truck.

    I want to avoid debt because at my age I have know idea many more years I will be able to do this work.

    I have seen too many businesses just on lawnsite go under because of being in debt. So I do not have to be convinced on the importance of being debt free.

    You can have a debt free business with 100 employees when the economy takes a dump and lay every one off and work solo again and survive the hard times.

    If the business has debt you can not lay off the debt as you would lay of workers to survive.

    I see myself working to hard to throw away money paying interest.

    I guess how much debt one can handle can not just go by a safe percentage of one's income.

    But by how much one makes and how secure one's job is and how easy one would be able to get rehired at the same or better money if laid off.

    Right now I am lucky that I can save the money to pay cash.



     
  9. herler

    herler LawnSite Fanatic
    Posts: 5,144

    No debt is safe to carry, that is how much debt it is safe to have.
     
  10. seabee24

    seabee24 LawnSite Senior Member
    Posts: 619

    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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