Chapter Twenty-Four

You Can Win

My readers are undoubtedly aware of the multitude of problems that flood the world of business today. Our national debt; the savings and loan and commercial bank failures; the downgrading of government bonds (mainly state and city); the default in repayment of foreign loans. The recent farm crisis and the wholesale closing of local businesses are examples.

It has even developed into a family dilemma. It has reached the proportions whereby certain lawyers specialize in family bankruptcies.

All of the above situations result from the imprudent handling of financial affairs. The greatest culprit is our Federal Government, which continually spends more than its ability to pay.

Our smallest single miscreant is ourselves, who continually pile up debts with our credit cards, until there is no tomorrow except for bankruptcy.

The credit card era has probably done more damage to family relationships than any other single thing. At present, more than 50% of marriages end in divorce, and most of them include money problems.

The banks are protected, since they charge up to 21% interest, which takes care of their credit card losses and still leaves a good margin of profit. The customers, as usual, pay the bill.

The money rolled in and the banks, in their greed for larger and larger returns, lent unsecured money by the billions to insolvent countries. They are now suffering the consequences of their shortsightedness.

Credit cards in one form or another are here to stay, and they will continue to disrupt our society, as long as people cannot resist the temptation to charge beyond their means to pay.

Cards by the thousands infest our country. They have literally taken control of the manner in which we spend our incomes. But where greed is concerned, it seems that too much is never enough.

The most insidious of all money entrapment has gained a foothold. It is being promoted as "Equity Loans." Each time an individual makes a payment on his mortgage, his equity increases. Appreciation, due to the business climate, also forces values up, which results in higher equity value.

Lending institutions perceived this situation as an untapped reservoir for hundreds of millions in loans against the best security of all, namely real estate.

A man's home is his castle and his ownership should be protected to a greater extent than that of any of his other possessions. His best protection is freedom from debt against his home.

Yet his bank, upon which he should be able to rely for sound financial advice, is busy trying to entice him to turn his home equity into cash, to be used for anything from a trip to Nepal to a weeks vacation in Las Vegas.

When he receives the money, he is in a much worse position than when he started making mortgage payments, years ago. He will not only have borrowed away his equity, but the monthly payments will have increased drastically.

I can think of no completely valid reason for borrowing against home equity, with the possible exception of saving a life.

Early in this chapter, I mentioned the debt of the Federal Government as being a national problem. Most of us do not stop to think that WE are the debtors. WE owe the money. WE must repay it. We offer no resistance. We elect any candidate who promises to arrange a "pork barrel" project for our district no matter how expensive or unnecessary. Our hands are tied, since we have no leadership against deficit spending by our government.

In spite of all this, there is one bright light which shines through this dark tunnel of financial chaos. That light radiates from each of us who prudently controls his own financial position.

It is not necessary that one spend his entire adult life struggling to meet installment payments on homes, cars, refrigerators, credit cards or what have you.

I have pointed the way to success in the Real Estate Development field because I have experienced that success. I am sure that my method of self-financing could and should be a goal of any business or profession, but that is another story.

It was a great thrill when I accumulated enough capital to operate without a loan. I didn't realize it would happen so soon, but after building and selling four houses, I had sufficient money to wave good bye to the bankers.

Of course I worked full time on my jobs at the beginning, and that saved considerable money. I am not mechanically inclined, but I found many things that I could do as well as anyone, even common labor.

I have a college degree, but I was so determined to succeed that common labor was a welcome task if it led towards my goal.

I remember an amusing instance that happened on one of my jobs. I hired an apprentice carpenter, and he was hard work under the supervision of the carpenter foreman. This was his first day of work. At lunch time, he came over to me and asked, "You are Mr. MacDonald aren't you?"

I said, "That's right."

"Then you own this business, don't you?" he queried.

I assured him that I owned the business where upon he asked, "Then why is it that you seem to be doing more work than anyone on the job? I thought the boss didn't have to do any work."

As I was searching for an informative answer, he added, "I don't believe I am going to like this business, because it seems the more successful you are the harder you have to work."

I was aware that he watched me quite often, during the next few days. He was merely a teenager and at the end of the week he said he had decided not to become a carpenter, and he quit his job.

Copyright ©1995 Robert A. MacDonald, All Rights Reserved.
Last revised: May 10, 1998.