Sunday, September 19, 2010

I Deserve it

It's this writers opinion that the three words that make up the title of this post have got more people in more trouble over time than any other three word combination except maybe, "Hey, watch this !"

Of course there are different kinds of trouble; what I'm going to talk about for the remainder of this post is the financial kind. Readily available credit, rent to own, interest only mortgages and "easy" payment plans have seemingly subsumed the idea that except in rare instances, one may better put off until tomorrow that which could be financed today. Most of the things one can buy and finance today are depreciating assets. As many people have learned during this recession, even home values can depreciate. For this reason, home equity lines of credit aren't usually a good idea, because where are you going to live when real estate prices drop (!) and you suddenly owe more than your home is worth.

Even famous financial analysts talk today about "good" debt vs. "bad" debt; the idea being that good debt will either appreciate in value and/or earn more money than it costs to finance it whereas bad debt just accrues costs with no hope of salvation. The truth is that *any* kind of debt is a gamble; even the safest forms of debt can backfire on occasion.

I'm guilty of thinking, "I deserve it" myself. As most of you know, Melissa and I are building out our new farm right now. With the exception of a little bit of mortgage debt, we owe no money on any of the improvements we've made, and we have no plans to accrue more debt by making improvements before we can do it with cash. Of course, having animals on two farms with one of them under near continual construction, combined with running old, fully depreciated equipment and vehicles adds a whole other level of inconvenience to our daily lives, and I've thought many times about how "convenient" it would be to just go ahead and borrow enough to finish it out, with maybe enough for a cab tractor, some new equipment, and a nice new car to spare. It'd work too. I'd look like a genius so long as our growth curve remained in it's current allometric state and nothing went seriously wrong in the interim. Unfortunately, I know very well that growth curves seldom remain allometric for very long. I also know that having things go wrong is very much a part of life.

This post was spurred on by a friends' untimely and very surprising farm auction notice, which was waiting for me in the mailbox today. It hit me pretty hard when I got it, and when I saw who'se equipment and real estate was for sale, I knew I needed to drive over pretty quick and have a visit with him. I did just that shortly before supper time tonight. It's not my business to know the circumstances behind his sale, and I didn't ask, but I do know that whatever happened, I'm sad about it. I hope I'll see him on a tractor again soon; next time in better circumstances than he currently finds himself in right now. Years ago, my grandad said that he'd rather have good neighbours than more land. Amen to that.


Kate said...

That's a very sad story. I'm very debt-adverse - there are occasions when it makes sense, but they're few and far between.

SmartAlex said...

After a few years, you learn that while the future may be pan out enough that it WILL be easier to pay for it later, you won't have quite as much fun spending your new cash on something that is now old and worn out.

Jason said...


I think the part everyone forgets about is that ALL debt is a gamble, and being able to repay it is almost never a sure thing.

Smart Alex; Exactly, and it really sucks a wad to be paying for something that is gone entirely !