“Neither a borrower nor a lender be.”

Not exactly a new quote but one that seems to have stood the test of time – in some respects anyway.  For whatever reasons, most “westernised” societies (and most other societies for that matter) have come to regard debt as some measure of success.  I know I date myself but I remember an old Andy Capp cartoon (from England) – and he says “If you owe 5 pounds you are a failure, if you owe 5,000 pounds you are a success, if you owe 50,000 pounds you are a business-man and if you owe 500,000 pounds you are a government.  I’m on my way!”  Keep in mind Andy was always on the dole, owed everybody money and he was toasting himself in a Pub with a beer purchased by someone else!  Keeping in mind this was a cartoon from the 1960s, if you extrapolate to today, it may still be a valid statement.

If debt is a measure of success as Andy states, then I guess most people in Canada are successful – but at what price?  Cy N. Peace quoted from 1957: “Modern man is one who drives a mortgaged car over a bond financed highway on credit card gas!”  How true for most of us – at one time in our lives or another.  But is this the best way to live?  Just a question, not making any judgements on anyone – I have debt too, and I have been in deep debt many, many years ago.

At the ripe old age of 22, I had fallen prey to the “you have been approved” letters in my mail and ended up with 62 – yes sixty-two – different credit cards and owed more than $25,000 in total.  At that time, I was earning the princely sum of $451.00 per MONTH before deductions and of course had rent, food, dating and other expenses – not a pretty sight but I found a very trusting banker who helped me re-arrange things and I paid it all off at 100 cents on the dollar – no settlements, discounts or waived interest.  Boy did it HURT!!!

I never went to parents or relatives for loans – I had seen in my own family that those situations just never turned out well – for anyone.  The family dynamic is broken irreparably in most cases and bitter feelings abound along with jealousy and a varying sense of future entitlement – usually around the time a parent passes away.  However, I am a cynic and I know that would never happen to anyone else or their family!

“The man who won’t loan money isn’t going to have many friends – or need them.” a quote from the great basketball player Wilt Chamberlain.  A very interesting perspective I admit and not that far off-base – big-time when loans aren’t properly documented – particularly if they are from family.  In real estate, the philosophy is “location, location, location” – in financial matters it is always “document, document, document”.  This means everything – dates, pay-back date, interest rates, periodic payments and consequences of default – and then stick to them.  Regardless of the fact the people may be relatives or friends, treat the entire transaction as a business agreement and handle it in exactly the same manner as any lending institution.  Nothing more and nothing less.  Verbal agreements are not worth the paper on which they are printed.

Sign on bank: “We can loan you enough money to get you completely out of debt.”  I don’t know which bank but I have no choice but to laugh – some people actually believe it too – unfortunately.

New sources of financing for businesses and entrepreneurs are now reality including “crowdsourcing” – being done these days predominantly over the internet and most appear to be scams regrettably.  The concept is fine – many small loans from many people, but what is the risk?  Where is your protection?  Remember caveat emptor – let the buyer (lender) beware!

James Dean

James Dean - President ~ Money Canada Limited (MONEY.CA)