What are your thoughts? I have been listening a lot to Dave Ramsey again, and we are actually on our way to knocking out a lot of our unneeded debt. I was aspiring to be debt free. My career goal is in 10 years to become a restaurant franchisee, and my boss says there is a such thing as good debt. He just recently bought 2 restaurants of his own, and is making a very good distribution even after the note payment each month. Even if debt free was a reality for me, it'd take me a very long time to save enough cash to buy a franchise outright, so I'm thinking that debt would be ok, as long as it's with a proven system and a store with a proven track record of profitability. What say the GS?
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Is there such a thing as good debt?
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Originally posted by robbyreneeward View PostWhat are your thoughts? I have been listening a lot to Dave Ramsey again, and we are actually on our way to knocking out a lot of our unneeded debt. I was aspiring to be debt free. My career goal is in 10 years to become a restaurant franchisee, and my boss says there is a such thing as good debt. He just recently bought 2 restaurants of his own, and is making a very good distribution even after the note payment each month. Even if debt free was a reality for me, it'd take me a very long time to save enough cash to buy a franchise outright, so I'm thinking that debt would be ok, as long as it's with a proven system and a store with a proven track record of profitability. What say the GS?
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All depends on your risk tolerance..And that depends a lot on you, your family, your needs etc.
Simple answer is yes, of course it is IF you go into debt and that in turn makes you lots of money that you would not have made otherwise. But obviously no if the debt doesn't work (like a lot of food service places) and causes you to go bankrupt.
I've always thought best to start small and if it's profitable, expand. If you can't sell 10 items per day and turn a profit don't try selling the same item 10,000 times per day thinking it will make a profit.
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Originally posted by txjustin View Postyes, absolutely. In the case of business debt is leverage, if you know how to handle it. Also, my opinion debt is good if it's bringing in revenue or future revenue and/or appreciation. My advice is to learn from your boss in those regards.
Just remember that Dave Ramsey panders to the masses.
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Originally posted by texas shag View Post^^^^^This. If the debt is generating revenue, it can certainly be a good thing. Most people don't own a business or have their debt generating income, therefore for most debt is not a good thing.
Just remember that Dave Ramsey panders to the masses.
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Originally posted by txjustin View Postyes, absolutely. In the case of business debt is leverage, if you know how to handle it. Also, my opinion debt is good if it's bringing in revenue or future revenue and/or appreciation. My advice is to learn from your boss in those regards.
True.
I'll add, the key to a successful business has as much to do with a willingness to take risks as it does with hard work. Debt is simply managed risk.
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Originally posted by fox1 View PostThere are very few Business models that operate debt free, I have never read a Ramsey book and I know some folks have had great success with them, but I promise you he doesn't live a completely debt free life.
There is a reason there is a "leverage" ratio on yearly fiscal statements for these companies.
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Most people who want to start a business have no other choice than to borrow. I didn't, but it worked out. Don't for a minute think that it didn't worry me though. But I knew my business, and my skills. It was the market that worried me. It's hard to borrow against a future that may go to hell in a hand basket.
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Originally posted by jerp View PostDave Ramsey is talking about not getting bogged down in consumer debt which is a problem that financially suffocates many Americans. However there are very few businesses - especially new businesses - than could make it without the leverage debt provides.
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