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Why You Shouldn't Fear Having Debt

The fear of having debt, is likely responsible for billions of dollars not being made by competent and capable investors and business people. While at a certain level, shying away from debt seems reasonable, it is often counterintuitive. The obvious exception to this is when an investor has a significant amount of cash, including enough additional cash flow to maintain their existing lifestyle, without any other financial implications. Outside of that, less debt means fewer available investable resources.

So how do we overcome our fear of debt? After all, many of us have had debt aversion ingrained into us since we were young, and it has likely served us well up to this point.

But not being amenable to debt has also likely cost you quite significantly. Not directly of course, but in the form of lost income and investment opportunities that have gone unrealised. Through this, you can see that while an ideal scenario would mean that we didn't need to experience debt to invest money, this is simply unrealistic, and the decision must then be made, how much debt are you comfortable with?

This is primarily a question of how you are currently evaluating debt. If you have a plan in place to service the debt, including contingency plans that will allow for a certain amount of flexibility, then it's likely you will be more confident. You will understand how the debt will be managed, and as a result will be more likely to feel more comfortable with a larger amount of debt. The goal then, rather than simple 'getting over' your fears, should be to have a strategy so robust, that you don't have to worry.

Obviously, this doesn't mean that your plan will alleviate all fears, just the ones that don't matter. For example, worrying about investments that you don't understand is a concern that serves no purpose and is not useful to you, and doesn't contribute to your investment strategy. Other such useless fears include confusion – "I'm not sure exactly why we're doing this," and confusion, "I understand why we're doing this but not how it works."

Why does this matter?

The importance of alleviating fear is crucial when it comes to building a sustainable investment portfolio. Most rookie investors stall once reaching their comfort level and prioritise their own perceived fears as more important than the growth of their investments. They consider (correctly) their ability to sleep at night without stress as being more important than financial growth. However, by learning the reasons behind certain strategies and, as a result, growing the portfolio in line with expertise and comfort levels, an investor can rapidly improve their own knowledge, grow their portfolio and do so without the stress that would otherwise be prevalent.

It begins with an acceptance that the investor, any investor, reaches their point of psychological limitation and stops. In other words, fear grows in line with expertise and if it cannot be overcome then further growth is stifled. Through learning and planning, any investor can move past fear and achieve considerable and meaningful growth.

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