HW "Skip" Weldon wrote:
>>> An overriding objective of good personal finance is to live within
>>> one's means. By that I mean that there are no unpaid balances at the
>>> end of a month - everything is current.
That is not a useful definition. If my net worth never decreases, how
can you possibly claim that I am not living with my means?
>> You seem to refuse to differentiate between good debt and
>> bad debt and imply that *all* debt is bad. It's not.
I totally agree. Businesses and governments use debt all the time, in
fact couldn't exist without it. Besides, too many people earn their
living off of the debt industry for it to ever go away -- and I'm not
talking just about the loan broker, I'm talking about the teller at the
bank, or the software programmer who builds the web site where you view
your credit card statement. Advising people to avoid debt is just about
as un-American as telling people to drive less, or commit fewer crimes
-- the ripple effects would cause our economy would go into a tailspin!
(said only slightly tongue-in-cheek)
> For background, I've been in the personal finance area for almost 4
> decades and have never met a successful person who would agree with
> you. (By successful person, I mean someone with a minimum net worth
> of $2 million today excluding residential real estate, inherited money
> and married money.)
That's meaningless as a statistical sample, starting with the fact that
it's a self-selecting group. Beyond that, if your clients are truly
self-made multi-millionaires (excluding entertainers, lawyers, or
doctors), lack of "personal" debt is most likely a result, not the
cause. I'll wager these people made money in one of two ways: either
through business, where I'm sure they took on debt (either directly, or
through investors and partners), or else through some combination of
living a long time in good health, passive investments at above-average
risk, no dependents, and parsimony. (I will concede that being
parsimonious includes paying little or no loan interest).
The converse is definitely not true: even using your definitions, simply
living within one's means is *not* sufficient to become successful.
There are probably at least ten thousand times the number of people in
this category as there are successful clients of yours.
(I also have a nit to pick with your definition of successful: are you
saying that if I own a $2 million home, it's not part of my net worth,
but if I sell it, bank the proceeds, and lease an apartment, now it
suddenly is? If so, that's got to be the easiest road to success I ever
heard of.)
I posted this once before a year or two ago, but it bears reading again:
"How to Become As Rich As Bill Gates"
http://philip.greenspun.com/bg/
Notice that debt, or lack thereof, had nothing to do with it. Becoming
rich has much more to do with your parents giving you a superior head
start in life, knowing that you won't be eating out of dumpsters no
matter what you do, and not being Mr. Nice Guy in your business
practices. I wonder how many of your clients owe their success to these
factors, rather than avoiding personal debt?
-Mark Bole
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