HEAR ME OUT

It’s your second year or third year in business, things seem to be going well, you are beginning to make a good amount of profit and life seems to be going great. You look back at your business plan and model and it looks good. However, the market begins to change, everything has taken a plunge, inflation is the order of the day, elections are nearing and everyone seems to be hoarding money/resources. You begin to wonder if at all you are ready or had planned for this? Can your business sustain itself for the next six months; will you be able to retain all or most of your employees?

It is important to plan your business and business model in a way that will factor in all possibilities. You can play the ‘What if’ game or generally look for loopholes to help you get solutions before disaster strikes. Every time I am out to make serious money, I figure someone somewhere is playing the ‘what if’ card on me. They think something unexpected may happen resulting to failure.
More often than not, they are right. However, a real business man/woman is able to spot this long before and either plan for it or get his/her money out and into another investment.

Every business is a risk taken. It’s vital to consider where else you can find the extra income. I once wrote about not placing your eggs in one basket as a means to financial freedom. You need to take note of that and make it happen. Let’s face it; you are not a professional footballer or athlete whose personal Manager has made plans to secure their future even after their retirement. As a matter of fact, there are some who become bankrupt once their careers are over or once they retire because they never thought to add another string to their bow (another source of income).

Diversification is the name and rule of the game if you want to be wealthy. Strive to have more than once source of income, broaden your investments. That way, whatever happens in a ‘What if’ scenario, you will be secure.

Be wise, whether you are in business or employed. Do not wait to act once you get fired or retrenched; it might be too late. Sustain your livelihood by letting your money work for you.
When I went to Spain sometimes back, I was amused by a local quote concerning debt. I noted it down and vowed to share it with my readers someday, “debts are like children: the smaller they are the more noise they make,” So the quote goes.
But many people, having been raised to have a rigid worldview concerning debt, struggle to use the avenue to build a fortune. When Obama got into office, he said that he found the national debt, doubled, wrapped in a big bow waiting for him as he stepped into the Oval Office. That’s the reality of debt. Even super powers have debt. But how can you take advantage of debt and use it to build an empire?

The reality that a majority of us cannot buy a house, buy a car, or go back to school to advance our education using cash is real. Getting a loan to finance our dreams is not bad at all but the secret to being successful is being smart with your money. It actually does take money to make more money.

So what is the difference between good debt and bad debt?

Good debt in a layman’s term means debt that creates value. For example, if you borrow money to buy land, go to school or start a business then that is good debt.
Debt is good, as long as it brings high return on investment. In my history of investing, investing in stocks, bonds, land and other high return investments is a healthy habit. However, it is important to realize that sometimes even the best ideas do not work out.

It is all a risk. You could go back to school and still be jobless especially during economic downtime's. Those who have just completed their high school education, usually have high hopes that once they go for higher learning they will earn more. But sometimes they get out of school only to find no employment or low entry jobs that they may think are ‘beneath’ them.  The secret is very simple, just take risks that are well calculated and wait for a good return on your investment.

It is great and commendable if you get into debt in order to start your business. The country needs more entrepreneurs and banks needs to soften their lending rules for such outliers. But even the best ideas also run the risk of failure. However, that should not dampen your spirits. When I started out, I didn’t know that I would build the business empire I have. But focusing on the next step, with determination and working smart, I achieved my goals. My advice is that you research well on the demand for your goods or services.

Bad debt, on the other hand, is borrowing and investing on products or items that depreciate and also are a liability. Buying expensive clothes, being a ‘sponsor,’ buying and over indulging in alcoholic drinks sometimes to impress friends, regularly eating out as well as using credit cards can be classified as bad debt.
I hardly ever eat out but when I go out I make sure that it is of value to me. If for example I am going to meet a business partner or an investor then it is a worthy investment to eat out. Therefore, before you go into debt, make sure you take the time to really ask yourself why you are borrowing the money. Will it add value to you? Is it a proper investment with high returns?

Of late there is a craze… Everyone wants to buy a car. While it is convenient to get a car, it may not be a good idea to get into debt for a car. It’s the kind of investment that will bleed your pockets in terms of maintenance, fuel, etc. Once you are done paying the loan for it, the car’s depreciation will make you realize that an alternative investment would have been better.
Remember that what eventually sinks a ship or crashes a plane (preventable causes) are a series of mistakes done repeatedly over time.

Conclusion

In a world that is rapidly changing, the only people who will rule are those who will take risks. In fact, the biggest risk is not taking any risk at all. In a world that is shifting really fast, the only strategy that is guaranteed to fail is not taking risks. Rise up and try out your idea. Save up for your initial investment. Take a bank loan and dare to venture into the realms of the unknown where risks are numerous but the rewards are many.

Decide if you will continue to report to trade your valuable 8 hours per day or more to build someone else’s ambition or you will risk falling into debt, having a few sleepless nights but be free from the curse of poverty