Load em up....!!!

I have always been a proponent of debt and this is another one of my observations ....and why I love debt so much. Now, this might irk Mr. Warren Buffet and his philosophy on debt and credit. But then, I have the right to an opinion and unless proved otherwise, I'm correct.

Please note: The words "debt" and "credit" used in the following paragraphs refer to unsecured debt only.

Let us analyze debt from an NPV (Net Present Value) perspective of an individual and let each transaction involving debt/credit represent a project. It might sound weird that eating pizza is a project, but if you look at through my eyes, it's not that hard to imagine. Basic corporate finance tells us that we should only take up those projects which have a positive NPV. So, if I buy a pizza for say $10 using a credit card, I consume goods worth $10 and I have to make a payment after I get my credit card bill. So essentially I paid less than $10 in NPV terms on a $10 pizza. If you pay by cash the NPV is zero. Sounds simple enough...right.

Now lets complicate matters a little but by introducing an unknown variable into the equation, DEATH. As you might be aware that if you die, the outstanding balance on your credit card is simply "written off". The same goes for any other type of unsecured debt, such as personal loans. Yes, banks do get such loans insured, but then you still don't have to pay anything.....Considering that death can occur at any time, wouldn't it be great if you always had some sort of credit outstanding, at-least you'll leave this world with one positive NPV project..!!!!!

Now lets add another small twist to the situation, probability. The probability of you dying is directly proportional to the kind of work/activities you are involved in. So the more likely you are to die the more debt you should take on (subject of-course to some lender willing to lend you that money).

So in conclusion, always use credit cards instead of cash/ debit cards, and maintain a constant level of personal debt. I'm still working on the optimum level of debt one should have so keep checking this space for more information.

But do remember:.....

"Leverage is a fickle bitch, my friend".....