It won’t always be possible to avoid, but taking out a loan to purchase something big and important will dilute your ownership of the thing in a major way. When buying a home or car through financing opportunities, this translates into a larger personal expense. But if you’re talking about a real estate investment or business purchase, it can cut into your profits or even alter the way you approach a new opportunity in the space.
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Mark Cuban is a big proponent of limiting your exposure to external financial obligations, specifically the repayment of loans. It’s easy to shirk lending options for financing important spending needs when you’re a billionaire, of course, but the lesson remains an important one for anyone thinking of making a big purchase in the future. The less you can borrow, the more ownership you’ll be able to enjoy of the thing in question. If you’re buying into a business, for instance, a monthly loan repayment can hamstring your ability to focus on the growth of the enterprise. Instead of tackling big-picture action items that might represent your priorities, you’ll immediately need to figure out how to make enough money to cover the repayments. Similarly, if you purchase a home to flip, you’ll be paying back the bank every month that you own the property, cutting into available cash for renovations and putting a stress-inducing clock on the project overall.
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