Never Borrow Money to Pay For Something That Goes Down in Value

“Never borrow money to pay for something that goes down in value.”

Those are the words or personal finance advice from Seth Godin, one of the greatest marketers of our time.

Seth brings up a really good point that is often overlooked. It highlights the concept of good debt versus bad debt perfectly. If you’re borrowing for things that go down in value you’re not only paying interest on the original amount, you’re also losing value in the thing you bought.

For example, if you purchase a car on credit you may lose a couple thousand through depreciation along with another couple hundred in interest payments from your loan. Therefore, it’s a horrible investment and a great way to lose money. The larger your car or purchase that goes down in value, the more this concept will be magnified.

Things that go down in value:

• Cars
• Recreational Vehicles
• The majority of consumer products
• Furniture

Seth discusses that he’d often drive to client meetings rather than fly and do a lot of restaurant window shopping rather than purchasing. I can completely relate as I avoid purchasing things that go down in value.

Check out his post titled: Marketer’s guide to personal finance.

Image from Joi