As an employee you have a set income. If you spend $5,000 or $50,000 you still make the same amount.
As a business owner you have a money machine. Money in turns into a certain amount of money out.
Many business owners I have met apply employee mindset finance advice to their businesses. They think frugality is good (which it is), but they also see debt as bad because of interest and risk. If you had a machine that turns $10 into $15 in a couple of months, wouldn’t you borrow as much money as you possibly could to put into that machine? As long as the interest rate on that money would result in a net gain it would be absolutely worth it.
There are three levels of financial intelligence that I’ve seen.
1. idiots who go into debt to buy things when they have a limited income. Sidewalk folks
2. People who think they are smart by only paying cash.Slow lane folks
3. People who want to put everything on credit because maximizing every dime towards their business growth is the most profitable.
My financial decisions seem to closely mirror someone who is a complete idiot. I’ll buy everything I can on credit, make payments, long terms, high interest, etc. and here’s why.
If I have $1,000 and need to buy something, I would much rather pay for it in $50 payments than cash upfront. I don’t even care if that interest ends up being twice the cost of the purchase. That’s because I know I can spend $1,000 on Facebook ads, which add $2,000 a month to my business revenue, which is $24,000 a year in a business that has a 30+% profit margin. So by paying cash, my cost is $7200 minus interest paid by financing my purchase.
With my business, it actually make sense to take something as crazy as a payday loan.
Now, nothing is certain. There is a chance my business idea doesn’t work. There is always risk. The odds of me making that profit margin are not the same as my odds of having to pay back that loan, but the math is still in my favor. Even if it’s only partially likely I make that profit margin, it still makes sense to take as much money as I can.
My whole life I’ve been told to avoid debt. I’ve been finding that it’s the greatest tool for growth. Debt is bad if you’re too stupid to turn a profit with it. If you are smart, debt is a blessing. I just received a 24,000 SBA loan. I’m putting it to work and I’m already seeing great things after just a week or so.
TLDR: Dave Ramsey is for middle class normal people.
As a business owner you have a money machine. Money in turns into a certain amount of money out.
Many business owners I have met apply employee mindset finance advice to their businesses. They think frugality is good (which it is), but they also see debt as bad because of interest and risk. If you had a machine that turns $10 into $15 in a couple of months, wouldn’t you borrow as much money as you possibly could to put into that machine? As long as the interest rate on that money would result in a net gain it would be absolutely worth it.
There are three levels of financial intelligence that I’ve seen.
1. idiots who go into debt to buy things when they have a limited income. Sidewalk folks
2. People who think they are smart by only paying cash.Slow lane folks
3. People who want to put everything on credit because maximizing every dime towards their business growth is the most profitable.
My financial decisions seem to closely mirror someone who is a complete idiot. I’ll buy everything I can on credit, make payments, long terms, high interest, etc. and here’s why.
If I have $1,000 and need to buy something, I would much rather pay for it in $50 payments than cash upfront. I don’t even care if that interest ends up being twice the cost of the purchase. That’s because I know I can spend $1,000 on Facebook ads, which add $2,000 a month to my business revenue, which is $24,000 a year in a business that has a 30+% profit margin. So by paying cash, my cost is $7200 minus interest paid by financing my purchase.
With my business, it actually make sense to take something as crazy as a payday loan.
Now, nothing is certain. There is a chance my business idea doesn’t work. There is always risk. The odds of me making that profit margin are not the same as my odds of having to pay back that loan, but the math is still in my favor. Even if it’s only partially likely I make that profit margin, it still makes sense to take as much money as I can.
My whole life I’ve been told to avoid debt. I’ve been finding that it’s the greatest tool for growth. Debt is bad if you’re too stupid to turn a profit with it. If you are smart, debt is a blessing. I just received a 24,000 SBA loan. I’m putting it to work and I’m already seeing great things after just a week or so.
TLDR: Dave Ramsey is for middle class normal people.
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