Lifemaker

I regularly talk about building Engines. I believe Capital and Labour are lovers, not fighters. Capital can set Labour free. Not all good ideas are good business ideas. Monetising is a process of creating supply and demand constraints. A lot of good ideas thrive without constraints... and are terrible business ideas. But we need money. 

If you break the trap of living hand-to-mouth, and start to focus on building Capital (i.e. building yourself an Engine), a world of good ideas are released along with you. Your money effectively becomes your breadwinner so that you can be a lifemaker. That doesn't mean you can't make money, it just means you don't have to let money be the primary driver.

Why are you driving?

Debt can support Engine building. Good Debt is like an employee that makes the company more than the company pays them. A business also has to be very cautious of committing to employ too many people. It has to meet Payroll. Businesses use Debt well if they realise they can put other people's idle Capital to work, and make more than they need to pay. Without putting the whole business at risk if they can't pay the salaries.

Debt can, and more normally is, the opposite of an Engine. It isn't an employee that is put to work doing something productive. Bad Debt is usually consumed with nothing to show. Eventually you still owe interest (the Debt's Salary) even though nothing productive is being done. It is like having to pay someone a salary even though they aren't doing anything.

I don't believe in using debt to buy stuff that doesn't work for me. Save for things you want to buy. 

Warren Buffett always multiplies the price of anything he buys by ten. A can of coke doesn't cost $1, it 'costs' him $10. This is because every dollar he spends is being fired. Put to work, that dollar could grow. Eventually, that dollar could be receiving a salary of a dollar. Spend that.

Apply the same rule to money you don't have, the picture gets ugly. Fire a dollar that isn't yours, and if you don't keep up the interest payments, eventually you could be paying that dollar for nothing. Again. And Again. And Again.

Build an Engine. Avoid a Debt Trap like the plague.

Plague Flea