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A very careful consideration of your strategy should guide you in borrowing money. You can easily adopt the following Laws—that wealthy and very rich people follow when thinking about borrowing—into your strategy:
1. If possible don’t borrow from friends or family.
You remember Law 8 which taught that life has never been a straight road and 26 which said that things more often than not turn out not as anticipated? Should that happen when you borrow from close ones, you will have a hard time trying to avoid them and they will try very hard to catch up with you. Result? Your close relationships can be strained or lost.
2. Only break Law 1 above if you absolutely must.
If borrowing from friends or family is your last resort for cash flow and investment into your business, then go ahead and do it.
3. Borrow only to invest in income producing assets.
Never spend or borrow against the promise of future earnings. That may never happen. Borrow money to invest in liabilities only when you can afford to do so. For you could never set up a big business without ever borrowing money. You could also never buy a house without borrowing money. So when you have to acquire something that could potentially generate a lifetime of income far beyond the repayments, then there could be great leverage in borrowing money to do so. For example, with a little help from the bank you could use the equity in your own home to purchase other 5 or 10 properties.
However be warned that borrowing money can bring heartaches: people have lost everything, including their lives, in this regard; interest on loans can be crippling and emotional debt to someone even more so.
Your debts and loans are what you must pay off first. Just as the Law of compounding [Law 34] can work to make you rich, it can also destroy your finances in matters of compounded loan interests.
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