There is always a time in life when you will run out of cash or be left with insufficient cash. Your business may run short of money just about the time you needed some money to fund an important project. Your family may need some money to pay some bills that requires immediate attention. The bottom line is somewhere, somehow in your life, you will have to borrow. This article will guide you on how to determine when best to borrow and how to make a wise borrowing.
• Define Your Limit Before Borrowing
Borrowing money without knowing the limit of your cash flow could be very dangerous. Before you borrow money, try to look into the source of your income before deciding on a certain amount to borrow. It will be very bad to borrow an amount that is higher than what you earn as salary or income. Your borrowing should be a function of what you earn as income.
• Be Sure of the Certainty of Your Cash Flow
Most people borrow money because they have the hope that one way or the other money will come for them to pay back. It’s not really a bad idea to have such hope; it only becomes a bad move when you borrow without the certainty of your cash flow. If the source of your repayment is not certain, try as much as possible to give it a second thought. Alternatively, find out other ways of calming the situation down pending when you will be certain of your source of repayment and its consistency.
• Borrow to Boost Your Future Earning
It’s always a nice idea to borrow money when it is going to boost or increase your future earning. For example, the money you borrow to fund your education or training in a marketable and market-ready skill is a good borrowing which for sure, will bring good financial returns. Another example is the money you borrow to finance a contract or a project duly signed and awarded by a trusted and reputable company or organization. These projects are highly placed because of their financial returns in future.
• Borrow to Acquire Opportunistic and Marketable Assets
Borrow money for assets that are opportunistic and marketable. Some marketable assets such as land, property, stocks, etc., are most times seen as opportunistic assets. When you notice such assets, and your only source to acquire them is borrowing, go ahead and borrow they will pay you later in life. The good thing about these assets is that they are easily sold at better prices in times of pressure on loan repayment.
• Borrow for a Reason and not for Fun
Borrowing money without a reason is like building a house without the necessary materials needed to make it become a real home. Before you borrow money, make sure you have considered the reason why you need such money and the purpose which the money will serve. Do not make the mistake of borrowing just for fun when there are no plans set aside to pay back when due. Always remember that the money you borrow for your personal use does not have a corresponding return for repayment.