So, take my information with a grain of salt. But this is how I personally think when it comes to finance. This is how I operate, but it is by no means a recommendation for how everyone should operate, since that would cause many other macroeconomic problems that I won’t go into detail here. Now, on with the blog post.
So, are you a good investor? If so, by all means, take as much leverage as you can handle, you’ll be rich in no time. But if you are prone to making poor decisions in life, well I’m afraid to be the bearer of bad news: you will always be broke and living paycheck-to-paycheck, getting by in life by paying just the interest on your credit card debt.
So what can we do about this? What do they not teach us in school that would make us more productive as citizens? Shouldn’t we doubt ourselves in the amount of leverage we can take? Are we really college material or are we just average people thinking we’re somehow gifted? Sadly, our parents like to think of us as special snowflakes, but in reality you are probably just as average as everyone else. If you know you are average, you should probably do something just as average as you are. As horribly demeaning as that may sound, I am trying to save you from the college debt that you would take on if you miscalculate your own capacity as a human being. Otherwise you will be taken advantage of by the college tuition loan shark industry who by no means have a proven track record of fiduciary responsibility. Also, you should blame your parents if they keep pushing you towards something you’re not capable of, since you end up footing the bill in the end. Sadly, your own parents are just as deluded as everyone else, and they’re probably giving you bad advice by pushing you towards college. This is where a parent’s unconditional love for their children can harm a child’s future prospects. As a parent, you should determine whether your child is college material, and to accept what God has given you. If your child is not college material, do not subject them to the livelong toil that is debt, and instead direct them towards a vocation that does not encumber them. You will be doing your own child a favor, and they won’t hate you for the rest of your life. And finally, you’re doing your fiduciary responsibility and due diligence as a Capitalist by properly allocating capital in the right direction, and this will likely make them wealthy (ie. you’re doing your children a favor by not getting their hopes up).
That being said, I’m one of the lucky ones, but there are millions of unlucky college graduates, many of whom are my good friends, who did not read the fine print of what they’re getting themselves into. And I am probably just as average as they are. And they probably listened to their parents.
I am not discounting debt here. I am only discounting the average person’s ability to measure debt risk. Credit reporting agencies do not have skin in the game as they benefit from a healthy number of defaults for different types of debt. You should really measure your own credit score and limit your spending if you are cognizant of your poor decision making skills when it comes to spending and saving. Credit score calculations act as a lower bound to how much risk a lender is willing to take with you. If your FICO score is lower than a certain amount, it means that you’re a default risk to them, and they’ll lose money if they lend to you. It’s really that simple. The same is true for corporations: Moody and S&P credit ratings are a measurement of how well a large institution or entire nation is able to pay interest on its debt, and whether or not such an institution is a risk to the bond or treasury holder. They too are not immune to the irrational lure of being overleveraged.
So what is to be learned from all this? Calculate how leveraged you can be realistically before you take on any more debt. Take advantage of debt when you’re confident that you’ll be able to pay it off in a short amount of time, so that you can take on more debt while growing your equity.
Also, I highly recommend this course for those with an interest in learning about finance. Whether or not you find finance interesting or not, I’m afraid you have no choice as a consumer. Your life is impacted by financial markets whether you like it or not.
https://www.youtube.com/watch?v=WQui_3Hpmmc&list=PL8FB14A2200B87185
So what is to be learned through this course? It’s likely that you all carry some kind of debt or obligation. The question you should be asking yourselves is whether you think you can afford that debt. That’s not something the lender should be responsible for as they’re selling the debt and you’re buying it. It’s really something you’re responsible for, and something you’ll be stuck with until you pay off your debts, better sooner rather than later.
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
Disclaimer: The above references an opinion that may hurt some people’s feelings. It is not intended to hurt your feelings. Seek a guidance councilor or therapist for emotional support if this does hurt your feelings.