Before you begin borrowing money again, pause first and reconsider this.
Borrow money only when —
First, there is REAL EMERGENCY. But even that, double check.
Do you really need to borrow money at that particular moment with that particular reason? Do you need to pay something that must be paid right there and then, and you don’t have anything to pay for it? (This is also why we need to save up for an emergency fund.)
Unless it is a real emergency, do not borrow money. Use what you have. Get creative and resourceful.
[Oh, I have to mention that any SALE at the mall for the day IS NOT an emergency. Don’t even say, “But I will miss that 80% discount!” No! The question is, do you really need to buy that item? Today? Really? Think again.]
Second, there is REAL BUSINESS. But even that, be careful.
Borrowing money has cost – this comes in the form of interest. If you are borrowing for business, make sure that what you will be earning is higher than the interest that you will be paying. If you are paying P10 in interest for every P100 that you borrow (10% interest), make sure that you will earn more than P10 for every P100 that you will put in. Factor in the efforts that you will exert and all the other capital that you will pour into that business venture. Maybe there has to be an earning of P25 or even P30 for every P100 (rate of return of 25% or 30%). Otherwise, don’t even think of borrowing or you will be losing. It is not enough that you will earn something. Will that something be able to cover and exceed the cost?
Also, it has to be a real business. Don’t fall into scams disguised as “business or investment opportunities” where you will be offered unbelievably high rates of return, 60%, 80%, 120%. That’s gambling! Some call it insanity! Yup, it’s greed, too. They will even teach you how to borrow money so you can join them in. Be cautious!
By the way, even if that something is a real business, you have to ask again. Do you really need to borrow money to finance that business. Is it really necessary to borrow or you better just use whatever fund you have right now? Bo Sanchez understands the concept of good debt for business but even he discourages borrowing. Is it really necessary to incur that debt? Better use your present resources and get resourceful and creative. Unless that is really, really, really worth borrowing for.
So before asking a friend, family member, relative or any lender to borrow money, think again. Do you really need to borrow today? Perhaps 99% of the time, the answer to this question is NO.
Quit borrowing money when it is not necessary. Borrowing has costs – and it is costly! Either you burn your borrowing habit or it will bury you to debt.
Let us work with what we have. Maybe the small amount we have can do something we did not imagine. Let us be better stewards of even that small resources that we have.
Two invitations for you: