acquiring debt sooner really
better? Can I pay off debt
in a reasonable timeframe?
Before you incur debt for anything, you need to ask yourself the following hard questions:
- 1. Is it worth it for me to finance this in order to acquire it sooner rather than later?
- 2. Can I pay the debt off in a reasonable amount of time?
Is Acquiring Debt Sooner Really Better?
Here are some examples:
- Starting or buying into a business. Often the opportunity may be right at a specific time. The income from the business will generate enough revenue to pay off the loan, with interest, and then some. If you wait, the opportunity may be gone. So in this case, sooner is better.
- Buying an income property. If you plan to buy a property that produces rental income, the sooner you buy, the more income you will get. Therefore, sooner is better.
- Financing an education. In today's global economy, education is becoming a requirement not an option. If you have the opportunity to go back to school for say an MBA, the sooner you do it, the sooner you will enjoy the higher income. Sooner pays off in this scenario.
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If you are spending money to acquire something that moves you ahead towards an important goal, then sooner may be better. Situations of this type fall into a few categories:
When debt can create income
When debt can lead to business tax breaks
When debt can increase your net worth
When debt can lead to non-financial benefits
Can you pay back your debt in a reasonable timeframe