Interest costs money. Right now, big money.
So I can see why the Dave Ramsey method of paying cash for everything can make sense for some people in some situations.
Anndddd even with interest at these levels, I’m willing to borrow money.
Gasp, 😱 I know.
Last week on Money Monday we went through how interest has changed on a land loan we only recently converted from variable rate to fixed. Go check that out if you want more on the interest conversation.
Ok, back to borrowing money and paying to do so. It comes down to three factors for us.
First and foremost, opportunity.
They don’t sell land everyday and they don’t sell good land in close proximity everyday. When the chance to buy land comes up, it’s quite likely a once in a lifetime on that piece. So we borrow money to make it happen.
Second, interest buys us time.
If we waited to buy assets until we had the money they wouldn’t be working for us in the meantime and neither would those dollars.
Which leads into the third factor; it’s simple math. If we can make a return greater than our interest then we are making money even with borrowing.
In the short-term our margin is slimmer, but it’s still cash flowing. Then when the loan is paid our margin balloons.
Making money isn’t easy, but the math can be simple.
Maybe it’s an agriculture thing, maybe it’s a business thing. What do you think — borrow money to make money or save money to make money?
