If Glinda from the Wizard of Oz were a Wall Street money mogul, she’d be wearing a pinstriped dress suit, striding across the room with two Blackberries to her head, with a personal assistant trailing her…
Her million-dollar question: “Are you a Good Borrower, or a Bad Borrower?”
Well, not really… but if she asked, how would you answer?
It’s kind of funny. I grew up watching the Wizard of Oz, wishing I was Glinda. She was pretty and powerful… but then I realized that she couldn’t possibly know much about her own job because she didn’t know whether Dorothy was a “Good Witch or a Bad Witch…” even though she was a witch herself. Needless to say, I no longer want to be her - but that’s beside the point.
There’s no magical question to determine whether you are a good or bad borrower - even though some of us float around in (metaphorical) pink bubbles… thinking all the while that we’re protected from our actions. Then one day, the bubble pops.
However, there are a few indicators of your borrowing prowess. Here is a simple breakdown:
The Good
Not overextending yourself
Good (low) interest rates and favorable terms
Paying off your debt quickly
The Bad
Not knowing your limits
High interest rates and unfavorable terms
Making minimum payments (or some other long-term payment scheme)
Of course it’s more complicated than that. It can certainly get a lot uglier - but that’s what accountants are for, right?
The idea is to evaluate your debt on a basic level, because when things get too complicated and time consuming, we tend to procrastinate. And more often than not, that leads to more trouble (and hangovers).
While you may not be able to get out of your “Bad” loans, you can certainly fix your “Bad” borrower habits. Ask yourself whether your borrowing habits fall into the Good or the Bad - and adjust accordingly. Sometimes the simplest questions are the most enlightening.
~K
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