October 12, 2010, 5:00 am

Why I Borrow So Often

by: The Financial Blogger    Category: Pay off your Debts,Personal Finance
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2 weeks ago, I told you about my bad Future Shop experience. That post started when I got declined for the 36 interest free payments via their credit card. In the comments, a fellow blogger, Financial Uproar, ask me why I was borrowing so often. My partner pointed out this comment asking me the very same question. This got me thinking about how I manage my personal finances since I started working back in 2003; I keep financing all the time!

Interestingly enough, I have grown my net worth from $0 in 2003 to $150,000 7 years later. How I was able to build such wealth while financing often and seeking more and more credit? Here’s a hint; the key point is now how much you borrow but what you do with your money. I have always believed that you can do much more money with other’s people money than only your own (especially when you don’t have much in your pockets ;-) ).

This year is particular

Before I go on & on with my theory of financing stuff and leveraging, I would have to look back on what has happened this year. It was quite a challenge to manage my budget as I had 4 significant expenses and a huge debt payment to make this year:

#1 My best friend’s wedding (2k)

#2 My wife’s 30th birthday (1k)

#3 My sister-in-law’s wedding (2k)

#4 Buying a 2nd car (12k)

#5 Reimbursing my parents (31k)

I could debate about buying a smaller car, giving smaller gifts and concentrating on paying off my parents sooner (I held this debt for 5 years) but those are the choices I made and I had a way to finance everything.

The good news is that I also sold my house. Since I made a good profit from it (about 75K), I was able to buy a new place and finance a part of my expenses. This is why I didn’t really feel the car and gift expenses as they went through my account without hurting my monthly budget too much.

Sure financing a car through your 25-30 year mortgage doesn’t sound like a brilliant finance plan. Sure financing your gifts and debt payment to your parents through low balance transfer credit cards doesn’t sound right either. Actually, it all sounds like postponing the problem until later on. In fact, this is how most people get into financial trouble because there is always a limit of what and how much you can postpone. Sooner or later, you have got to make your payments.

So what’s up with my personal finances? Shouldn’t I be more reasonable?

I guess that you may be right. I guess that there are other ways to manage one’s personal finances in order to avoid borrowing constantly and having a comfortable emergency fund. It surely does sound better from a personal finance blogger / banker, doesn’t it?

I actually think that I have managed my finances the best possible way! Say what? But I won’t tell you how come today… I’ll wait until tomorrow ;-)

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Comments

$1,000 on your wife’s birthday? C’mon man, you’re setting the bar a bit high for the rest of us ;)

I really think that half the battle is understanding why you are making the choices and having, at the very least, a reasonable justification.

by: The Financial Blogger | October 13th, 2010 (1:06 pm)

@Echo,

it was her 30th birthday and we went skydiving ;-) I’m not doing this next year… hahahaha!

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