Good day to you, my reader! We are going to discuss another important lesson about money: You should not consider borrowing money as a solution to financial problems.
It happened to me, and until now I am still wrestling with the liabilities that I got due to my stupidity. I have my own share of stupidity and I am not ashamed to admit that.
In fact, I’m blogging about them here, to guide others not to fall into the pit that got me. If I can warn more people about the mistakes that I made, I may save a lot of lives, or families from disintegrating.
It is true, financial problems affect families more than any other factor.
How Did The Problem Start?
It all started when I decided to start a pharmacy business in a community where the average net income per day per household is just $3.
I don’t have enough capital then, but I have high hopes then that through determination and my willing to help the community get access to vital medicines my business will succeed.
You can imagine how hard my situation was when starting out, there were certain medicines that I can provide all because there isn’t enough capital for me. To complete the list of essential drugs, I took out a loan from a bank.
I thought that additional capital will help me solve the problem, but later I realized that I should have considered also the fluctuations in sales. In an agricultural area like ours, people’s liquidity is largely influenced by seasons—seasons like crop harvesting.
In between harvest times, people struggle financially and also business sales.
If you have a business where sales are affected by seasons, or your business’ market grows and shrink with the seasons, the last thing that you would like is having a loan you have to pay no matter what.
Here Comes The Due Date
My initial goal was to set aside money diligently for the the repayment of the loan. By saving $3 per day, my mind was set to making payments in due time but unfortunately it didn’t turn out as planned.
Of course, during the first months, it went according to the plan. I was able to save money for the repayments via setting aside a portion of my daily revenue. But then, when the sales started dipping down, the problem began.
I got no other choice but to borrow money… Yes, I borrowed money for the repayment of borrowed money!
If I didn’t do it, then probably I became a delinguint borrower and my credit score damaged. The problem with this is, you struggle to protect your credit score by artificial means—borrowing money from Peter to protect your credit score with John.
Can you guess what has just been created with this?
My liabilities multiplied. Loans multiplied until there were so many of them to repay.
As I look at my drugstore now, I feel like I am no longer the owner of this business. The real owners now are the lenders, the loan sharks, I am now a custodian—their employee that’s tasked of overseeing their business.
The Mystery of Due Dates
With bank loans, due dates are a normal part of lending.
But if you are a person borrowing money from a person, my advice for you is to avoid agreeing on a specific date of repayment as much as you can.
In most cases, the lender will usually ask for a fixed date of repayment, whether in part or in full. And it is a normal practice for banks and financing company to set due dates of repayment, while with individuals, you can negotiate.
If you can, try negotiate with your lender (if you are borrowing from a friend) to not have specific date of repayment. Like for example, instead of promising him to pay in May 30, just promise to the lender that you will repay him either last week of May or first week of June.
That is if he will agree to that proposal.
The reason I sugges this is, if you got in a situation wherein there is no other choice but to borrow money to repay a borrowed money, you will obliged to take out a new loan to prevent from defaulting in your promised repayment date.
Your liabilities will multiply, and they will drag you down further.
Money has a mystery.
It is not that evil thing others think of. It is in fact dependent on the person handling it. If the person is smart financially, that person can make that money work in favor of him. But if the person gives in to stupidity, money might work oppositely.
And since money can become a hard working servant to anyone who knows how to control it, it can multiply. And so the financial problem of the person who mismanage it (just like what happened to me).
Now, are you in the same situation like mine? Are you considering borrowing money as a solution to money problems?
Be wise and as much as possible, be aware of what negative potential due dates have. Trying not to default in due date by borrowing money can get you deeper in debt.
But there’s good news, you have the power to change the course of your life. You can let the creditors just scream at you, just assure them that although you can’t make it to the due date, you still have plans to repay them. This may be a very unpleasant option but at least, it won’t multiply your debt.