Monday, 8 December 2014

Systematic Accumulation of Debts

I was once afraid of calls offering loans to me. "Dear Sir, you are our privilege customer and we are offering you a special rate for balance transfer of 1% processing fees and 0% interest rate for 6 months..." I would immediately hang up... what? what do I need to take loan for? 

Debts is good if you know how to use it. Lets rationalise it this way. There is the OCBC 360 account giving up to 3.05% per annum. Compared to the cost of 1% processing fees for loans up to 6 months? Hmm.... 2.2% effective and 1.05% free money? Why not?

In this low interest rate environment, it is an anomaly of normal situation and we must not let slip this opportunity. 

Run your life like a company. In every company there is cashflow and in most companies, debt is necessary to expand the business. Same for your own financial life. Without leverage or accumulation of debts you cannot go far, yet discipline is important to prevent misuse of the debts. All debts deployed into a business goes into capital accumulation or cashflow and they are never ever used for frivolous expenses like company D&Ds and rewards for staff. Those comes from business profits. It is the same as for your own life... debts taken are not used for holidays or merry making, it is used to enhanced your position in life. 

Accumulate debts systematically for capital accumulation and for cashflow purposes. Use only business profits for merry making.

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