Debt Management
I decided to do a series of articles on debt management. How to borrow, how much to borrow, good debt, bad debt, whether to borrow at all…etc.
One important part of debt management, albeit at the fag end is the management of debt beyond a particular level. If you have debt of say Rs. 2 crores, and the rate of interest is 10%, your interest outflow is Rs. 20 lakhs. Now if your income is Rs. 25 lakhs, there will perhaps be no cash to pay the interest. More importantly no incentive to – and the more ‘sensible’ option would be to default.
Is it a moral thing to do? Well…who said money is all about morals..read what solution is being suggested here
http://johntreed.com/default.html
or look at the Americans celebrating bankruptcy. It has grown 5 fold in the 30 years since 1980….
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Subra,
This will affect the world economies in a wrong way. We will not be an exception to that. Is there any way we can guard ourselves against such an event. Especially , for a person like me dependent on the revenues generated out of software exports wholly to US of A.
It will be great if you can provide us with some insights on this.
Regards
Sujit
If you are dealing with the USA you need a hedge against the dollar losing value. Please remember USA is perhaps the best market in the world for most products – so buy things that you can use in the US (obviously assuming prices are reasonable)and / or BORROW in the US – and use your income to repay the loan.
Borrow to do what? Tough to say, your call – do not buy real estate or gold. If possible buy some ETF, RITES, …avoid gold for the longer term. It could be in a bubble much worse than other assets – it has no back-end cash-flow to support its price.
if you buy gold for the cash flow,you are buying it for the wrong reason. thats the fundamental flaw in all the value investors (buffet included) dislike for gold.it is a vote of no confidence against paper money.thats about it.if the world had no fiat currency,gold will probably go down in price.the higher prices are indicating that the fiat bubble is only gettin bigger.