It?s best to start business debt free
Dear Dave,
I?m thinking about starting my own small business, and was wondering about the best time to do something like this. Should I wait until my home is paid off or until I have a year?s worth of expenses savings?
? Bernie
Dear Bernie,
The best advice I can give you is to start this business DEBT FREE. Don?t run the risk of losing everything by borrowing a bunch of money right off the bat and becoming a slave to some banker!
You don?t necessarily have to have your home paid off or a year?s salary saved up, but you DO need a track record in what you?re doing to make sure you?ll still be able to eat and keep a roof over your head. It would be a lot easier, too, if you started this new business out on a part-time basis in your spare time. I launched my company from a card table in my living room, so I know it can be done.
I?d also examine your business idea and figure out how long it will be before you start seeing some real money in the deal. Some businesses make money sooner than others, but you need to have some idea when you?ll become profitable and able to live comfortably off this idea.
? Dave
Dear Dave,
I owe $20,000 in consumer debt. I?m selling my current home, which I don?t like very much, and want to take the $25,000 in equity to pay off everything I owe. After this, I?m planning to live in an apartment for about a year then make a huge down payment on a new house. Does this sound like a good plan?
? Dale
Dear Dale,
I think it?s a good plan because it sounds like you?re ready to get out and would sell the house anyway. But if the only reason you?d sell your house is to pay off the debt, then I?d say don?t do it ? just get angry at the debt and attack it instead.
Feeling like you?re forced to give up your home is an emotional experience ? one that can damage your spirit. You should always exhaust all the other options before putting yourself through that kind of stress.
? Dave
Dear Dave,
We?ve followed your advice and put our kids on commissions instead of allowances. Now, they know they have to earn things instead of having it handed to them. The problem is our 10-year-old daughter. She is EXTREMELY frugal and never buys anything. We want her to understand its okay to spend money if you do it wisely. Any advice?
? Susan
Dear Susan,
Well, it?s not the worst problem to have ? especially at that age. But you?re right for wanting to teach her wise spending habits.
Each of us has the personality of being either a spender or a saver. As parents, it?s our job to help accentuate our kids? strengths and help them stretch and grow in areas where they have weaknesses.
Praise her for being so good at saving, but encourage her to spend a little, too. Spending is one of the rewards of disciplined saving and working. You might let her pick something she really wants and help her make plans to save enough money to buy the item. Once she has enough money, then it becomes a celebration of a goal reached.
There are three good things you do with money ? you can spend it and have a little fun, you can save it and build up security and you can give it away to help others. Focusing too much or too little on any of these is not healthy.
? Dave