Think of money as a worker.
Or yourself as the worker. Pick one. Bad debt is when you spend money you don’t
have, and aren’t about to get. So you now have to work for someone to pay for something
that doesn’t exist anymore. Slightly better is when you know money is coming,
but you spend in advance. So as new workers arrive, you redirect them to
someone else. Still, the workers never work for you. Leverage (borrowing lots)
is when there is horrible work to do, but you can get lots of other people’s
workers (easy borrowing) to work for you. And you hope it works out (i.e.
Gambling). Good debt is when you have a good project, with acceptable risk,
that creates something of value. You can pay a reasonable salary (interest) to workers,
with some certainty, and build. Only borrow when you have a clear plan to
create value and have the strength of endurance (Capital repayment) and flexibility
of resilience (interest payment) to make that value creation sustainable. The
first step to financial freedom is not having to borrow to spend. Finding space
to breathe. Borrowing for consumption is the key difference between working for
money, or money working for you.
"Bauer beim Umgraben" Van Gogh (1882)
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