Few weeks ago I got am interesting question on my mail. I’m publishing it here with the permission of the author. In fact his situation appeared a bit specific, so what I want to discuss here is only the general question from the first email:
I appreciate your column (blog) and enjoy the honesty. I would just like some advice (not that I would do it :-)) about a move I am contemplating. I am 37, married and 2 young girls. I have a business and a building that I could sell hypothetically and pay off all my debt (personal and business) and end up with approximately $85,000 USD. I am also considering just selling the business and renting the building to whomever buys the business. I would still be able to pay off the building the business is in and have money left over. But we would still have our house (which has a low monthly mortgage).
I am not qualified to give a real investment advice, but let me just share my opinion. Why do you want to sell the business? Is it not working well? In my opinion a working business is the best investment one could make in life.
Of course it depends on your business nature
If you are kind of self-employed and your business requires you to work all the time, then it might be worthy to consider selling.
I personally wouldn’t care about paying my debt if the business is profitable. I don’t know why everyone is so keen on paying off their debt. Debt is something good if you use the money from it in a way that it produces more money.
This situation reminds me (well not exactly, but kind of) about our (me and my girlfriend) home loan. We are preparing to build a frugal home (you will read about it soon) and need a very small loan. Most of our friends can’t understand why we prefer to get the loan for 25 years when we could easily pay it for 5 or 10. I know for 25 years I am paying higher total to the bank, but how does it matter when what I am paying every month is so much smaller? When you add the inflation, the payments we make to the bank will get lower and lower in real value each year.
So we are not in a hurry to pay loans quickly.
I don’t think selling a business just for the sake to get out of debt is a good idea. Of course it’s completely different question if you have good idea what else to do with the money from the sale. What is your take? Do you think people should get out of debt as soon as possible?[ad#normal-banner]