# So talk to me about debt, how much is the right amount?



## NYCB (Sep 20, 2010)

After making it through the first two years I need to grow a bit. I buy tools as needed, and I managed to pay off my truck and my trailer, and I keep a small balance on one credit card to boost my credit score.

Unfortunately I need to buy my first high dollar item, I am in the market for my very own skidsteer so I can quit renting for my own jobs and potentially rent it out or do dig out work for other guys if they need it.

I don't have that much cash though and although I hate being in debt I think financing is the best option for maintaining my good credit through to the next purchase.

I know it isn't as cut and dry as this, but what is a good amount of debt to have, like a percentage of your monthly/annual gross? Considering how big the difference from one months jobs to the next can be I know its not the greatest gauge.

I definitely need to begin expanding slowly though, as I feel a hit a small wall this year due to having to constantly rent equipment.


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## Inner10 (Mar 12, 2009)

As little as possible...I'd finance it or buy used.

Don't carry a balance on your credit card...


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## summithomeinc (Jan 3, 2011)

You should only use less than 1/3 of your available credit to keep the best score.


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## NYCB (Sep 20, 2010)

Inner10 said:


> As little as possible...I'd finance it or buy used.
> 
> Don't carry a balance on your credit card...


I know I shouldn't carry it, but I keep it paid down except a couple hundred because my last loan officer told me that a revolving balance helps your score. The APR is low enough so I just write it off as a small credit score fee, which sucks that I actually have to do that.


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## Oconomowoc (Oct 13, 2011)

If I was in your shoes the very first thing I would do is calculate out the true cost of ownership of that piece of equipment. I would then figure out the difference between renting, leasing or owning.

Once I had that number I would figure out length of time I want to own the machine before trading it in. Then I would calculate monthly potential using minimums. 

Finally, I would calculate what future opportunity, if any, ownership gives me. 

Once that's complete I think the "debt" problem would be easy to figure.


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## overanalyze (Dec 28, 2010)

sitdwnandhngon said:


> I know I shouldn't carry it, but I keep it paid down except a couple hundred because my last loan officer told me that a revolving balance helps your score. The APR is low enough so I just write it off as a small credit score fee, which sucks that I actually have to do that.


Actually using it every month and paying it off every month is best!


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## Inner10 (Mar 12, 2009)

overanalyze said:


> Actually using it every month and paying it off every month is best!


You build credit faster paying interest on time... they like that!


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## overanalyze (Dec 28, 2010)

I will tell you to talk to a dealer about new machines. When we bought ours we were looking at used. To find a unit with lower hours that wasn't beat to hell was hard. The new machine was only a few thousand more plus we were given better rates from Bobcat as incentive as well. 

Don't forget to factor in a trailer and upping your insurance to cover the new/used machine!


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## overanalyze (Dec 28, 2010)

Inner10 said:


> You build credit faster paying interest on time... they like that!


Yeah..kindof f'ed up to me. Lets reward you for poor financial habits.


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## NYCB (Sep 20, 2010)

overanalyze said:


> I will tell you to talk to a dealer about new machines. When we bought ours we were looking at used. To find a unit with lower hours that wasn't beat to hell was hard. The new machine was only a few thousand more plus we were given better rates from Bobcat as incentive as well.
> 
> Don't forget to factor in a trailer and upping your insurance to cover the new/used machine!


I did call a Bobcat rep actually and he offered better rates than my bank. :laughing:

He had a few used units with low hours and said they try to move them this time of year because the new line will be coming out. So that is the route I have been looking.

I tried checking the classifieds and the auctions but most of the stuff was beat to hell and still going for over 15k, I couldn't believe it. Stuff that was leaking bad and rust top to bottom.

Still just looking at this point as I don't need to make payments through the winter if I can avoid it, but in the spring I am hoping to have enough work lined up to pull the trigger.


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## griz (Nov 26, 2009)

Owning equipment is not cheap. Parts, repairs, maintenance & fuel are a never ending battle. Do you have a trailer for it & will your truck safely tow the machine. Don't forget the decreased fuel mileage & extyra wear & tear when towing it. It will get even more expensive if you try & rent it out for income.

Check your insurance. If you rent it out to someone who isn't insured & they incur damage as a result of using the machine you may be exposed to some liability.

Equipment is VERY handy to have, but sharpen your pencil when you start comparing ownership to rent as needed.


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## Tinstaafl (Jan 6, 2008)

Inner10 said:


> You build credit faster paying interest on time... they like that!


Little known fact: In CC industry jargon, someone who pays his entire bill every month is called a "deadbeat".


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## BamBamm5144 (Jul 12, 2008)

You don't even want to know my debt 


I do have one business credit card that I max out then pay off right away. Usually cycle at least 20k a month through it. It does help build my business credit score.


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## overanalyze (Dec 28, 2010)

Tinstaafl said:


> Little known fact: In CC industry jargon, someone who pays his entire bill every month is called a "deadbeat".


I'll be that kindof deadbeat all day long! Sad that they want people in debt like that...some aren't smart enough to see that trap. I learned my lesson years ago....thankfully I was young and know enough now to not repeat.


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## NYCB (Sep 20, 2010)

griz said:


> Owning equipment is not cheap. Parts, repairs, maintenance & fuel are a never ending battle. Do you have a trailer for it & will your truck safely tow the machine. Don't forget the decreased fuel mileage & extyra wear & tear when towing it. It will get even more expensive if you try & rent it out for income.
> 
> Check your insurance. If you rent it out to someone who isn't insured & they incur damage as a result of using the machine you may be exposed to some liability.
> 
> Equipment is VERY handy to have, but sharpen your pencil when you start comparing ownership to rent as needed.


Maintenance isn't a problem, I already have a few guys that I maintain vehicles for and I'm aware of the costs.

I did not think of insurance though, I'll have to talk to my agent.

Trailer shopping right now, but lots of overpriced junk out there, my truck will tow fine, I keep it well maintained and its a monster.


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## NYCB (Sep 20, 2010)

BamBamm5144 said:


> You don't even want to know my debt
> 
> 
> I do have one business credit card that I max out then pay off right away. Usually cycle at least 20k a month through it. It does help build my business credit score.


I use a separate card for my expenses too, they gave me a 20k limit. Like I said though, I pay it all down each month except a couple hundred bucks. It was almost intimidating at first to have a card that I could charge a car to, but I learned to use it to my advantage.

The reward points are a nice little bonus each year.


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## EthanB (Sep 28, 2011)

It's not a specific answer to your question but you should be talking to your accountant about this. When you bring on equipment it goes on the balance sheet so the debt amount isn't necessarily as important as your projected cash flow position.


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## BamBamm5144 (Jul 12, 2008)

sitdwnandhngon said:


> I use a separate card for my expenses too, they gave me a 20k limit. Like I said though, I pay it all down each month except a couple hundred bucks. It was almost intimidating at first to have a card that I could charge a car to, but I learned to use it to my advantage.
> 
> The reward points are a nice little bonus each year.


I've gotten over $1500 in reward dollars. Just for buying stuff and paying it off.


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## NYCB (Sep 20, 2010)

BamBamm5144 said:


> I've gotten over $1500 in reward dollars. Just for buying stuff and paying it off.


:laughing: I am looking for a new gun safe right now with my reward points. Might have to put it towards tiling the kitchen floor though. Not sure yet.


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## Flag ship (Nov 21, 2008)

Look into long term lease. In the end the cost of repair and up keep vs you and more you comes to a balance. More over in this environment I would think hard about the ability to return if not in use high on the decision scale.
The last high reach I finally purchased I went this route first then purchased. Many companies credit back 50% of the rent toward down money. Point is the annual expense in either case was a very close balance. But in the end I did have the product paid and value. Be Careful in the economy.

How much debit to have true freedom the sum is zero. Just how much of your rights or freedom/time/life would you be willing to give up that should be your tolerance of it.


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## ohiohomedoctor (Dec 26, 2010)

Easy E we have a cool thread about hip hop you might like..


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## Oconomowoc (Oct 13, 2011)

dvasilop said:


> You can't sit there and tell me you can't get any debt because it is impossible to operate a business with out debt. Because your competitors will get into debt to gain a competitive advantage on purchasing the best equipment to get the job done efficiently.


I can sit here amd tell you it. I personally know my competition and I watch them sweat bullets every month worrying if next month will be good.

I pay cash for my trucks. Cash for my supplies. Cash for advertising. 

So tell me again how debt can be used against me? What can they do that I can't? Who's in a better position to take on debt? The guy who is saddled with debt or the guy who has none? 

This is construction not a multi million dollar manufacturing company with 500 employees. Debt plays an important roll for them but no so much for us in construction.

I don't know where people come up with the idea that debt is a requirement. That's foolish, especially in current times. It's as if the last 5 years hasn't taught people something, even people who had very low debt have lost everything.


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## dvasilop (Nov 1, 2012)

Easy there million dollar man. Not all of us have the funds that you have. I am just an honest guy trying to run a business and I don't have that kinda cash laying around. Therefore I require debt and I would say the majority of us do HOWEVER requires close attention so that you don't get what is called " the snowball effect."


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## Oconomowoc (Oct 13, 2011)

dvasilop said:


> Easy there million dollar man. Not all of us have the funds that you have. I am just an honest guy trying to run a business and I don't have that kinda cash laying around. Therefore I require debt and I would say the majority of us do HOWEVER requires close attention so that you don't get what is called " the snowball effect."


Needing to or doing it because you have no choice is a totally different discussion than recommending going into debt to.be competitive. 

I can't say this for everybody but most contractors I know who are in debt always seem to be broke. 

In the current environment debt is a very dangerous thing. Construction can stop on a dime.


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## Oconomowoc (Oct 13, 2011)

Not to ask a stupid question but why are some of you in debt? What are the loans for?


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## BamBamm5144 (Jul 12, 2008)

Oconomowoc said:


> Not to ask a stupid question but why are some of you in debt? What are the loans for?


Because it costs money to make money.


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## Oconomowoc (Oct 13, 2011)

BamBamm5144 said:


> Because it costs money to make money.


That doesn't answer my question. And making money doesn't have to cause debt.


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## dvasilop (Nov 1, 2012)

Excavator, crane, skidsteer,and a trailer. I probably owe 20% on each equipment. And because it is a lease I use the full amount as a tax deductible.


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## Oconomowoc (Oct 13, 2011)

dvasilop said:


> Excavator, crane, skidsteer,and a trailer. I probably owe 20% on each equipment. And because it is a lease I use the full amount as a tax deductible.


Yeah, that makes sense for the guys who use big equipment.


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## dvasilop (Nov 1, 2012)

But that's what I meant by gaining a competitive advantage. I could build a home from scratch. From the foundation to the framing and then sub-contract the plumbing, electrical work, etc. Larger profits in starting the foundation.


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## Oconomowoc (Oct 13, 2011)

dvasilop said:


> But that's what I meant by gaining a competitive advantage. I could build a home from scratch. From the foundation to the framing and then sub-contract the plumbing, electrical work, etc. Larger profits in starting the foundation.


I don't think that's a competitive advantage, all that does is open an opportunity for someone who doesn't have the cash. An actual competitive advantage doesn't exist. 

When you say "build a home from scratch" I'm assuming you mean spec home right? The guy with cash pays no interest and answers to nobody. That's an advantage.


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## Oconomowoc (Oct 13, 2011)

A friends buddy is sitting on a spec home he thought would sell. I don't know the math behind it but I know he borrowed most of it. He recently sold his Cadillac because after almost a year of sitting and shelling out $2,000 a month (assumption) he's out of money. The home price is dropping and he will lose money. 10 months at $2k is $20,000. Plus a drop in price of around $30k is a $50000 assumed loss all because he borrowed money he didn't have yet assumed he had an advantage.

I haven't seen the house in person so I'll make the assumption is was a poor design and in a poor location. I can't be certain.

What I do know is leverage carries risk, always does, and it can often times go bad and when it does the cost is usually high.

A real competative advantage in the world of construction is derived more from marketing than is does from financing. At least in my opinion.


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## chris klee (Feb 5, 2008)

the GC i a PM for is a debt free company. 
We actually got a job for a bank because of that. We were not the lowest bid, and they tried to qualify the lowest and determined he had too much debt and was too much of a risk.
because all we have is the American Express that gets paid every month we can operate on less cash flow if needed (and have). therefore we were less of a risk of going under during this rehab project.


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## chris klee (Feb 5, 2008)

dvasilop said:


> You can't sit there and tell me you can't get any debt because it is impossible to operate a business with out debt. Because your competitors will get into debt to gain a competitive advantage on purchasing the best equipment to get the job done efficiently.


i know several businesses that are debt free and have always been. one is The Whiting-Turner Contracting Company. one of the largest construction company in the US. guy found a partner, got the first job, and never took on debt after that. they are a 3+ billion $/year company.


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## hdavis (Feb 14, 2012)

It's like roofing - you can make a lot of money if you don't fall off, and debt makes the surface a little more slippery.


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## Oconomowoc (Oct 13, 2011)

Lol


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## BamBamm5144 (Jul 12, 2008)

Oconomowoc said:


> That doesn't answer my question. And making money doesn't have to cause debt.


I guess I look at debt differently. When I started I needed a trailer, compressor, ladders and some other miscellaneous tools that I knew I would need no matter what type of project I did. I took 8k out of my savings to pay for it. Right there, I am 8k in debt from the company and the company has to pay me back.

Then there are other things like vehicles that most don't have the money to pay cash for if they are getting something newer and reliable. 

You get large discounts on advertising is you pay up front instead of monthly, etc. so that means you will be in debt for a little while right there.

I don't know how anyone started their company without taking on debt. If you took money out of your personal business account to pay for anything business, right there you are in debt.

I owe about 35k to "creditors". It isn't that big of a deal, most of it is vehicle payments.


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## Oconomowoc (Oct 13, 2011)

BamBamm5144 said:


> I guess I look at debt differently. When I started I needed a trailer, compressor, ladders and some other miscellaneous tools that I knew I would need no matter what type of project I did. I took 8k out of my savings to pay for it. Right there, I am 8k in debt from the company and the company has to pay me back.
> 
> Then there are other things like vehicles that most don't have the money to pay cash for if they are getting something newer and reliable.
> 
> ...


Debt from yourself isn't real debt, that's just called risk. You're smart enough to know what I'm talking about when I say debt. Lol

They guy that doesn't have money is.much different than a guy who has it but makes a transfer. Transferring assets and taking a risk is very different than debt from a bank.

Come on now.


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## BamBamm5144 (Jul 12, 2008)

Oconomowoc said:


> Debt from yourself isn't real debt, that's just called risk. You're smart enough to know what I'm talking about when I say debt. Lol
> 
> They guy that doesn't have money is.much different than a guy who has it but makes a transfer. Transferring assets and taking a risk is very different than debt from a bank.
> 
> Come on now.


I will admit I am confused. If someone needs a loan for a 50k excavator, is that then going in debt or taking a risk?

My wife and I have a loan on both of our vehicles and have a mortgage, is that considered debt?

I guess I always considered debt to be when you owe someone and got nothing in return. Like Credit Card Interest - that is debt. Putting 15k on a credit card each month and paying it off, is smart debt.


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## Creter (Oct 13, 2009)

BamBamm5144 said:


> Putting 15k on a credit card each month and paying it off, is smart debt.


Smart Finance since since technically your 15k in hand should be making money.

Same thing with 6 -12 month financing at 0%. If the cash is there, use that option GMAC or Wells Fargo is offering.


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## Creter (Oct 13, 2009)

This topic is seen often here around St. Louis. Every year when that first blade of grass peeks it's head high enough up to be cut you see several new rigs rolling with new trailers full of new equipment.

Or a new concrete flatwork company will come in with debt up to it's eyeballs, plastering it's name all over every damn bill board there is and stuffing every mailbox full of advertising. 

These types of business only last a few years before they roll into a new identity or abandon ship due to the debt.


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## dvasilop (Nov 1, 2012)

BamBamm5144 said:


> I will admit I am confused. If someone needs a loan for a 50k excavator, is that then going in debt or taking a risk?
> 
> My wife and I have a loan on both of our vehicles and have a mortgage, is that considered debt?
> 
> I guess I always considered debt to be when you owe someone and got nothing in return. Like Credit Card Interest - that is debt. Putting 15k on a credit card each month and paying it off, is smart debt.


That is what you call unsecured debt. When you finance/lease and Excavator, if I were to default on the loan they could by law seize the asset.


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## Oconomowoc (Oct 13, 2011)

BamBamm5144 said:


> I will admit I am confused. If someone needs a loan for a 50k excavator, is that then going in debt or taking a risk?
> 
> My wife and I have a loan on both of our vehicles and have a mortgage, is that considered debt?
> 
> I guess I always considered debt to be when you owe someone and got nothing in return. Like Credit Card Interest - that is debt. Putting 15k on a credit card each month and paying it off, is smart debt.


Well, it's not that hard. Go and ask a bank. What will they look at?

Did you manage to save money and have plenty of it?
Current cash flow?
Profit?
Risk analysis?

All things have risk. Which risk is greater? The guy who has cash or the guy who borrows? (Hint hint, look at the housing crisis)

It's just not trivial for me I guess. When you get older you start to see things in life like unforeseen circumstances. You may look at your situation and think you have it all figured out. You will look at your current balance sheet and say "35k is nothing for debt". But that only represents a balance sheet current for TODAY only. Life is good.

Then one day you find out your wife has cervical cancer and that leads to complications with not only dealing with life on a personal level but on future income. Then you get a letter saying you owe $238,000 because insurance is so royally phucked up it's ridiculous. Then what?

But don't worry, you tell yourself it's gonna be ok and things will work out so you drain every once of cash you have to pay for things. Retirement gone. Saving gone. You got nothing but a bunch of debt that at the time seemed peachy azz keen but suddenly seems like the dumbest azz move you ever made.

The shiny new truck, trailer and equipment looks pretty good through the living room window though and you say "I suppose I could sell it". "Oh crap, recession, I'm upside down now and nobody wants it".

But your good at keeping it in because, you know, gotta be strong for your wife. Keep it in, give support and don't talk about the finances thats slowly sending you to your own grave.

Nobody is smiling in the house including the kids but everybody looks at you for answers and a way out. They believe in you because you are the man, the guy who took out the loans and said "don't worry, all smart people borrow money". 

But you manage, you convince yourself this is as bad as it get. Unfortunately it's just begun. The bank calls and says hey "we sent you a letter about being 2 months behind is everything ok?". Yiu talk to a real person for a change and respond with "not really but I will make the payments I promise". She say ok, and wishes you all the best. Three days later you get a letter from the banks attorney they says pay up or it's going to court. You don't believe it, you think "I can just pay and things will work out". They don't.

Now you 1/2 a million in debt and growing. Lawsuits are busy trying to tack on 30% more to an already growing bill. 

It all collapses. Everything is gone. The only assets you have is clothing. Friends look at you like you're a alien on crack cause they can't for the life of God figure out how a person could possibly lose everything.

Fortunately you married a good and decent wife and she says screw it. She smiles and says lets start over.

So you each drive to the bank and park the car and truck under the shade tree in the corner. You walk in to the office of the loan officer you were friends with for 20 years who wouldn't work with you and who refused to offer any assistance for anything. Nothing.

You take those keys and you throw them right at his chest and say "phuc you! You drive them for a while! We're done!"

And you walk away smiling to yourself "I will rebuild my business in to a powerhouse of profit and I will do it with no debt". Life is different, you've now seen life through a different lens and you make a vow to never again let another man have any control over anything in your life.

It could happen. Just sayin.


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## Gary H (Dec 10, 2008)

Mike , that last post is close to what i went though. Very close. I had the plans. I had it all figured out, only my ship had a couple of holes that I seen too late. A couple of key people I was counting on were not on board, like I thought, and when I found out, it was to late. Debt has a way of making you a slave and instead of you controlling your life, your new master is.


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## chris klee (Feb 5, 2008)

Oconomowoc said:


> Well, it's not that hard. Go and ask a bank. What will they look at?
> 
> Did you manage to save money and have plenty of it?
> Current cash flow?
> ...


well written.


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## BamBamm5144 (Jul 12, 2008)

Okay so file bankruptcy. Plenty of people do it and start fresh.

Fortunately my wife's work provides us great insurance. Our maximum annual out of pocket is $1000. Of course that will change when Obamacare goes into effect.

Don't get me wrong, I don't like debt and I don't want it but I don't know anyone without it.


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## Oconomowoc (Oct 13, 2011)

I just realized I never responded to Bamm when he said "I can't see how you can start a business without debt".

I have some thoughts on that, purely hypothetical of course. I'll shoot a couple ideas at you later on.


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## Gary H (Dec 10, 2008)

When I had debt, I was a go getter. Took every job because I needed the money.

Now with no debt I only take on the jobs I want at the price I will do it for. I seem lazier now. 

I dont know if its all a good thing or not.


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## BamBamm5144 (Jul 12, 2008)

Oconomowoc said:


> I just realized I never responded to Bamm when he said "I can't see how you can start a business without debt".
> 
> I have some thoughts on that, purely hypothetical of course. I'll shoot a couple ideas at you later on.


If it costs money - it's debt. Unlike a regular job where all you need to do is collect a paycheck which is pure profit, just filing papers for your own business costs money.

I get what your saying but I'm just trying to jump deeper into it.


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## Oconomowoc (Oct 13, 2011)

BamBamm5144 said:


> Okay so file bankruptcy. Plenty of people do it and start fresh.
> 
> Fortunately my wife's work provides us great insurance. Our maximum annual out of pocket is $1000. Of course that will change when Obamacare goes into effect.
> 
> Don't get me wrong, I don't like debt and I don't want it but I don't know anyone without it.


Yeah, you mean like one of the best insurance policies available from a wife who is an administrator in a well respected hospital. Yeah, nothing can go wrong. Load up on debt, it's the American way. 

Hmmm, bankruptcy. That's not the the end of the problem, that's where the real problems just begin. 

Bamm, you know I like you so please don't take any of this the wrong way but you were in high school just a few years ago trying to bang the prom queen. What seems like reality now really isn't. 10 years, maybe 20 you will look back with a different perspective.


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## BamBamm5144 (Jul 12, 2008)

Oconomowoc said:


> Yeah, you mean like one of the best insurance policies available from a wife who is an administrator in a well respected hospital. Yeah, nothing can go wrong. Load up on debt, it's the American way.
> 
> Hmmm, bankruptcy. That's not the the end of the problem, that's where the real problems just begin.
> 
> Bamm, you know I like you so please don't take any of this the wrong way but you were in high school just a few years ago trying to bang the prom queen. What seems like reality now really isn't. 10 years, maybe 20 you will look back with a different perspective.


I'm not taking it the wrong way. I understand things happen. However, a family member getting cancer and accumulating hundreds of thousands in hospital bills will affect you even if you have no debt.

I understand the importance of paying in cash but it takes a long time to accumulate wealth. Sometimes you need to borrow money so you can get to the point where you don't have to.

I think a bigger issue is being "underwater" on the debts you owe. If I needed to sell my truck, I could walk away with 5k in my pocket. If I needed to sell my house I could walk away with 30. My equipment I will lose some money but not all. 

Being under water is what got everyone in this mess. Now buying a 2k Tv on a credit card is taking on unnecessary debt.


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## Oconomowoc (Oct 13, 2011)

BamBamm5144 said:


> I'm not taking it the wrong way. I understand things happen. However, a family member getting cancer and accumulating hundreds of thousands in hospital bills will affect you even if you have no debt.
> 
> I understand the importance of paying in cash but it takes a long time to accumulate wealth. Sometimes you need to borrow money so you can get to the point where you don't have to.
> 
> ...


Sure, I would agree with that Bamm, but that's still a very simplistic view of the world. Look, odds are pretty good things for you will work out great and I'm not just saying that. I've read and listened to alot of the forum members here and I've always thought of you as a very bright and smart man. 

The things is though, debt is simply not a requirement and for some reason this country is brainwashed into thinking debt is somehow healthy or a good thing or even "managed debt" is a good thing. Yes, it can be but it's in now way the correct thing to do.

You mentioned you don't know business owners who don't have debt. My response is you don't know enough people then. Lot's of very smart business men carry no debt. I'll explain why.

The common response to debt is why tie up cash right? The response is often "use the cash to invest and make money"

But who actually does that? Not many people. Besides, where would the cash go? Should it go in the stock market? My return on my business is much higher than the stock market. Should I put the extra cash in real estate? The return on my money is higher on my business than real estate. Think of it as an equation.....

1.) Borrow for the business + put cash into investment that yields lower return than your own business. This requires a partnership with you and a bank.

2.) Put the cash in the business and own everything lock stock and barrel. No partnerships with banks and nobody can control anything if things get bad. Nobody.

I am my best investment. It took me years to fully grasp that. I put all my money into myself. 

But the real rewards with having no debt and plenty of loot is just starting. You now have power to take the work you want, you are no longer forced to do jobs to make payments. The world is completely different. Because you took on no debt and plowed it all into the company your return on your investment is maximized. Now you save even more money. Now banks come to you for friendship instead of you going to them. Better yet, they pay you to be friends with them. 

If you have never seen this side if the coin you don't know what I mean. Try it. Your life will never be the same.

Note: A little bit of debt isn't a big deal, I'm not 100% against it.


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## 91782 (Sep 6, 2012)

Oconomowoc said:


> Sure, I would agree with that Bamm, but that's still a very simplistic view of the world. Look, odds are pretty good things for you will work out great and I'm not just saying that. I've read and listened to alot of the forum members here and I've always thought of you as a very bright and smart man.
> 
> The things is though, debt is simply not a requirement and for some reason this country is brainwashed into thinking debt is somehow healthy or a good thing or even "managed debt" is a good thing. Yes, it can be but it's in now way the correct thing to do.
> 
> ...


I agree 100% with this post, and the other one above it by Mike.


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## Gary H (Dec 10, 2008)

SmallTownGuy said:


> I agree 100% with this post, and the other one above it by Oconomowoc.


Mike does have a way of putting it into something thats easy to read and understand.:thumbsup:


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## hdavis (Feb 14, 2012)

BamBamm5144 said:


> Okay so file bankruptcy. Plenty of people do it and start fresh.


LOLOLOL!!!!!

Ever had a friend with their own business go through this? This is the LAST thing you want to do. Better to negotiate with creditors.


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## Oconomowoc (Oct 13, 2011)

Gary H said:


> Mike does have a way of putting it into something thats easy to read and understand.:thumbsup:


Experience my friend. What I thought was the worst experience of my life turned out to be the greatest possible lesson in manhood on earth.

I'll tell you what the scariest financial reality is behind debt, and one thing that's never ever discussed - power.

That $35k that Bam has is NOT $35k, that's not even the beginning. 

Debt is ALWAYS tied to something and that something is usually things we desperately need. For example....

I had about $80k in equity on the house. And let's just say you owe $10k on another debt instrument. Well, what people don't realize is that those with the financial power control ALL of it including your equity. In other words, you CAN'T GET IT. And when you can't get it and you can't sell it, because they control the asset, you begin to realize how little power you have. They can shut you right down and you can't get a penny of it. So the little $10k that seems insignificant becomes a giant monster.

Jesus was right, the Bible explains in full detail how debt can destroy a man in minutes.


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## 91782 (Sep 6, 2012)

Mike, thanks, thanks, thanks.

We were talking at supper tonight, about this topic, hurricane Sandy - you know, LIFE stuff.

I've been down many a road, handyman, builder, manager, employee. I've lived paycheck to paycheck, job to job, and also worked some amazing big projects with the perks that go along with it.

The happiest I have ever, ever been, is when I first worked for myself, and paid cash for EVERYTHING (because I had NO credit). The business grew as MY reputation did. And when I needed a bigger truck to haul material, I bought a used stake truck - CASH.

When the then current wife and I went out to dinner, we always ate at the best restaurants, whenever I/we felt like it, and paid CASH.

When it was time to buy a place - I bought a ghetto house on Deer Lake, and paid CASH. 10 years after my younger brothers did - but free and clear. 

When the wifey needed a car, we bought a 2 yr old Eldo, and paid CASH.

I bought a Harley with 15 miles on it, paid cash, got it for 1/3 of new. I bought a .45 Colt New Service Flatop 1927 Camp Perry - the one that actually won the event - for $400 CASH. Worth what - $45K today?

When my brother-in-law wanted to start a snow removal & lawn maintenance company, I bought 3 well used Fords for CASH, I did the repairs & he made the payments to me. When he gave up, I had the trucks - and no payments to a bank.

When my very best friend in the whole world wanted to start an excavating business, I bought a used Case 350 w/6-way, and paid CASH. When he got a a really good union carpenter job and left me high and dry, I still owned the Case, free & clear.

When I went to bed at night, I slept like a baby, no bills, no worries, no gut aches. If the economy took a chit so what? Every day, I woke up actually eager to go to work, and knowing I didn't HAVE to. There's been some good, some bad, and a whole lot of ugly since then, and that's all I got to say about that.

Except, I had been thinking lately that the days of running a CASH business, of living on what is in the hand, instead of what's in the bush, were long gone and impossible. But that ain't so.

All it really comes down to, even today, is: What is more important - having the bling-bling NOW, to impress yourself and your friends, or down the road, when you don't have to sweat bullets when the impossible happens?

There are so many people I know who have done better than me, and they all used money that belonged to others. Since I am not that bright or ambitious, I have gone back to what I know, and pay CASH for nearly everything. I have a small debit card, an HD Contractor card, a VISA for when I go out of town, and no payments on "stuff".

PS: There is no "wrong way", but chit DOES happen.


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## Oconomowoc (Oct 13, 2011)

SmallTownGuy said:


> Oconomowoc, thanks, thanks, thanks.
> 
> We were talking at supper tonight, about this topic, hurricane Sandy - you know, LIFE stuff.
> 
> ...


Would you like to be wealthy? You wrote the only secret you need to know to get it in your post. Try and find it, it's one sentence with 7 words in it. My entire business and marketing is based 100% on your 7 word sentence. Take your time and find it.


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## BamBamm5144 (Jul 12, 2008)

hdavis said:


> LOLOLOL!!!!!
> 
> Ever had a friend with their own business go through this? This is the LAST thing you want to do. Better to negotiate with creditors.


Yep. Family member did it. Owed around 100k two years ago. Already started a new company and has two locations in two states.


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## hdavis (Feb 14, 2012)

BamBamm5144 said:


> I understand the importance of paying in cash but it takes a long time to accumulate wealth.


And a short time to go broke trying to get rich quick. 

Figure it out, 4 out of 5 small businesses are closed within the first 5 years. That's why you insulate your personal wealth from your business. The fastest way to make a lot of money in business (or go broke) is just sell everything, tkae the cash to Vegas an put it all on one number on the roulette wheel. Better odds than running a small business. So how do you really keep from losing your a** running a business? Market and sell to the profit upside and manage your whole business (and life) to control the downside risks. 

Look at everything you do with your money in terms of pay back. If your payback on a purchase is 3 years and it's junk after 5, you aren't making any real money off of it. Give me a 3 day or 3 week or 3 month pay back, and I'll do it. 3 years? Maybe, but payback is projected, and the further into the future you project, the more chance you'll be wrong.


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## cbtexas (May 18, 2007)

As Dave Ramsey says, " Debt is dumb, cash is king and the paid off mortgage is the new status symbol of choice". I think he is right and you should not bite off more than you can pay back within a month or two. Take baby steps and only borrow what you can pay back within a month or so. Preferably within the same month so you don't accrue any interest. Take your profits and plow it back into the business. Slow and steady wins the race.


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## overanalyze (Dec 28, 2010)

cbtexas said:


> As Dave Ramsey says, " Debt is dumb, cash is king and the paid off mortgage is the new status symbol of choice". I think he is right and you should not bite off more than you can pay back within a month or two. Take baby steps and only borrow what you can pay back within a month or so. Preferably within the same month so you don't accrue any interest. Take your profits and plow it back into the business. Slow and steady wins the race.


I enjoy Dave Ramsey's mindset. I do have debt, my mortgage. I owe about 50% of the value so very unlikely it will ever be underwater. Other than that the only time I carry a balance on my cards is when it's interest free. My wife and I always pay our cards off in full every month. 

The business has debt. Very small ratio. It's on one truck and our gradall lift. Everything else is paid for. We pay rent to our second company which holds the building mortgage. We are on track to pay it off about 8 years early! I think you can go debt free, but I also think if you are smart you can use other people's money wisely and be more profitable long term. 

If you are going to have debt, you just have to be disciplined that it gets paid first no matter what!! In two more years we will owe only on the building!! Our goal is to end up debt free, but it's hard to start out debt free....not impossible..but hard.


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## FramingPro (Jan 31, 2010)

Not sure if it has already been mentioned or not but..
The way i see debt and have been taught about it is that there is no such thing as the 'right' amount' this right amount is individual to each person or business. There really is not specific value, the value is dependent on your circumstances. Debt can be a great business tool, if handled properly. I feel the only time debt is bad is when it has gotten to a point where you are insolvent...Everything has the potential to bite you, but if handle it properly then it can work for you, not against you. :thumbup:
Just my view of it, from my limited business experience.


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## NYCB (Sep 20, 2010)

You guys have me scared now. Winter is coming fast so I am going to re think everything over the next few months.

I think you guys are probably right on about taking more time to accumulate the money I need to just buy what I want.

Maybe prices need to go up, or maybe I need to book more work, but it seems to make more practical sense. 

I am sweating a little right now actually with minimal numbers on my CC, I haven't received payment from a job last month yet and the costs are on there, not a good feeling with winter looming.

But in the vein of debt, does anyone market high end work to customers who need to pay with a CC. I have been thinking about it more and some of the smaller, but nicer jobs can run only a few thousand for the customer and take little time. Seems like a good market to corner since lots of people don't have a problem swiping their card to play keep up with the Jones's


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