Debt Nation: Why Debt Is A Dumb Way To Create Wealth

It’s hard
to say “No” when things are made easier for you to say “Yes”.

Take for
example a typical day at the bank. You walk in for the purpose of paying your
bills or getting a little bit of cash for the week.

Then an
Account Officer approaches you:

“Sir, you
qualified for our Cash Advance promotion. Only 6% per annum. You can borrow up
to $15,000. No paperwork. Just let me know if you’re interested and I’ll open
the credit line for you.”

The Account
Officer lost you at “$15,000”.

From there,
images of a vacation at the Bahamas or a Mediterranean cruise flashed in your
mind. Or how about the home repairs that you’ve been putting off?

Once you
say “Yes” to the Account Officer, you may be signing off your life savings and
more.

Repeat
after me: “Being in debt is a dumb way to create wealth”.

Getting a
credit line is not creating wealth. Instead, you are digging yourself a debt
trap.

The bank
says, “It’s your money” even when it is not.

You don’t
have the freedom to use “your money” the way you want to because of the
interest rate that is factored in. Every time you draw from the credit line,
you are charged interest.

People who
buy into credit sooner or later find themselves mired in debt quicksand. They
sink deeper and deeper into debt.

Some people
borrow thinking they can pay for it in the future. They borrow money to invest
in the equities market or buy property thinking they can repay the loan in the
future.

“Need
money? Open a credit line right away! Fast and easy withdrawals. Up to $10,000
available!”

Sound
familiar?

But
investments are speculative. Anything can happen.

All you
need to do is remember the 2003 crash of the equities market. Banks made it easy
to borrow money. People took out mortgages. Entrepreneurs financed businesses
with loans.

In a global
economy, what happens in one part of the world has a cascading effect across
the globe. Uncertainties, volatility, and chaos created by 9/11, the Iraq
invasion, and the threat of global recession affected demand and triggered
economic slowdown the world over.

Businesses
closed down. People couldn’t pay off their homes. Entrepreneurs couldn’t pay
off their loans. Uncollected loans pushed lenders to bankruptcy.

Every time
you take out a loan, you are increasing your financial risk levels. Nothing in
life and business is certain. Business conditions can turn without warning.

The
feasibility studies you made are merely projections. They are not predictions.
When you take out debt for investment purposes, you are effectively putting a
damper on any advantage or return that you have projected.

Don’t get
tempted by easy credit. This is nothing but a short-term solution offered by
banks and lenders which only serves their interests. The banks feed on your
sense of complacency and impatience. They know your weaknesses and will exploit
them.

The banks
will not lose anything. At worse, they will settle or secure the collateral.
You will be the biggest loser.

If you want
to create wealth, put in the hard work. It may not be easy but that is how
winners do it.