The Two Sides of Debt
Warren Buffet wrote a column about how the U.S. could lessen its debt.
“The United States economy is now out of the emergency room and appears to be on a slow path to recovery.”
That’s what billionaire Warren Buffet wrote in a column in the New York Times August 19. He added, “But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects.”
Buffet is not so subtly referring to debt.
It’s tough to not incur debt, when it seems like the only answer is to borrow money. After all, when you need money, it seems like the solution – and the side effect, debt, is just something that comes later.
Money and debt are two things business owners must deal with every day. Credit is necessary and a necessary part of business. But borrowing beyond the capacity to pay is dangerous, as many large companies found out last year.
Overly leveraged, they couldn’t afford to meet their interest obligations, and many defaulted.
For those companies and individuals who have overleveraged themselves, now is the time to do something about it.
Brad Sugars, founder and CEO of ActionCOACH, says the best way to get out of debt is to not borrow excessively in the first place. However, if you do need to borrow, you need to stay on top of your numbers and make certain you can pay down your outstanding balances as quickly as possible.
These days, creditors and suppliers may be looking to extend or revise terms, because the credit markets are still tight, and everyone wants to “stay in the game” of business.
Try going to your creditors and see if you can change or revise your terms. Then get on a budget and stick with it.
“Knowing your numbers,” as Brad would say, is one key to succeeding in business and in life.
Knowing when to borrow (and when to pay down what you have borrowed) is key to long-term financial success.
Business Coaching | Stephanie Sims | September 22, 2009
Brad, Brad Sugars, business, caption, column, credit markets, debt, interest obligations, money, slow path, U.S., United States, united states economy, Warren Buffet
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