I don't work with heavy machinery, but as an outsider that seems like something you really don't want to go cheap on, and is probably worth the debt cost. Every hour that machine is not working is costing you tens of thousands of dollars, to say nothing of safety.
You're confusing the lumber industry with Gold Rush Alaska, they aren't losing tens or even thousands of dollars if they're offline for an hour. Dave was probably right that the fancier equipment has more bells and whistles, it's also probably has greater capacity and efficiency but it's not clear that this company has the need for it at their scale. I doubt the "cheap" version is less reliable, it just has less capacity and fancy things that aren't making you more money anyway.
Did you even listen to the interview this was really not that bad and they are only 29 years old, they are probably better than you and many Americans all things considered.
I went from a net worth of around -400k to +1.1 million in a span of 8 years thanks to Dave’s baby steps and self discipline! Now I tell all my friends/family/co-workers about his plan!
@@skycaptain95 around $80k per year after taxes. I took the "rice and beans" to heart... living on $20k per year and paying off everything with the other 60k.. That took a while, but after everything was paid off, I had gotten used to living frugally, so now I'm on a fancy rice and beans budget and have been investing about $50k per year for the last few years. All combined I have around $660k in stocks/savings and my paid off house is worth around $450k.
@@IrisP989 all paid off! Cars I buy used... Lexus, BMWs - would be $50-60k new, but I buy them around 3 yrs old with less than 50k miles (usually leased vehicles that have been turned in after a 3 yr lease) and get them for half off... I have a Lexus that was $28k, and a BMW that was $35k... both 50k+ vehicles when new. And I now pay cash for the cars I buy. I make the deal as if I'm going to finance ...I don't tell the dealers that I want to pay cash until we agree upon a price, that way they're willing to negotiate more.
Exactly. These people have $800,000 in debt on a business with $1.3 million in equipment capital and a $300,000 a year net operating profit. This is a very prosperous little business. There is no good reason to treat the business debt the same way they should treat the Cc and car debt. These people’s problem that Dave SHOULD have addressed is why the heck they can’t control their spending enough to be in CC debt when they make $300k a year.
Could possibly be the company card that just has the operating expenses run through it and get payed in full every month. When I dabbled in farming my fertiliser supplier charged everything to my card, which I then payed in full every month.
It's vitally important for a small business owner to not consider the entire business profit as personal income. Set a salary for yourself and employees, and bank the rest for business needs (retained earnings.)
Pay $800k vs 600k with no warranties? Sounds like theyre in a good position to pay off the debt... Last thing they want is to save 200k to have their equipment break.
Agreed. You may or may not like this method of growing a business, but the reality is their financial situation is entirely a bet on this business. It is 100% incompatible with pivoting to Dave’s method. You can either sell the whole business and get stuff jobs and follow Dave’s method or continue on your current course and manage your personal finances well.
@@adamseidel9780 Also they kind of glided over the differences in equipment. Since it's a logging business I'd be asking like, are their significant differences in safety? Like would an employee be more at risk operating different equipment? Will they need more training? Does the machine produce as much output and at the standard of quality their business is known for to their customers? Is it efficient? Will they need to buy other supporting equipment/parts for upkeep? etc etc. I'm not in the logging industry but I assume these are all pretty big considerations when operating heavy machinery with potential for catastrophic injury or business destroying liability/mechanical failure concerns.
Often times it’s him talking over the caller when they are not finished answering a question he asked them. Although sometimes they’re definitely just rambling.
This is a successful and profitable enterprise. Pay down the debt on capital in a way that maximizes the tax deductions through depreciation and continue forward in a balanced way. Pay it down faster if that gives major replacement risk benefits (I have no idea how long equipment like this is made to last). The business debt is highly manageable and takes care of itself. The personal debt should he easy to clean up on no time. The mortgage is NO problem, clean those credit cards up in like two months and get into non-ridiculous cars and you’re doing very very well. There is no need to even go nuts here.
Heavy logging is definitely a place where a good piece of equipment is worth gold. If it’s a critical thing, the cost of failure means zero revenue. These folks are probably a little fancier than needed, but they’re not in wild trouble or anything.
Why wouldn’t you put the vehicle in the business and write it off entirely? Are the equipment depreciated? If you took depreciation and you sell them, you will get a recapture of the tax. This is messy and you need a CPA not a money saving guru
@@blackworldtraveler3711 Not all debt is considered bad. Debt used to buy capital to produce income is great as long as it Produces profit. Versus consumer debt which in general is bad.
@@blackworldtraveler3711 all debst not the same, they may have 640k debt on a machine but said machine makes money and and they still have equity in it so....
"Is al dept, er means me ta say death. na wait "debt" ya das it. Bidness er kinsomor; makes na differ." So said Harvard professor of economics Milton Smith at the SBFA Small Business Federation of America conference in Washington, last week.
At first, Jade was like OMG. I'm glad Dave is here to take this question. But after thinking about the situation, she had some valuable input as usual. She is a great addition to Dave's team, and is not bad on the eyes either.
I think it is impracticable never to go into debt to acquire assets. If you try to save and buy everything cash there could be so many missed opportunities taking all that time to be able afford the item. The price of the item could also change. From listening to this podcast, I think the problem with most people is that they take on too many different types of debt all at once. People need to incur debt for the really important items, and practice delayed gratification for the not so important things in their lives. In other words, do without those not so urgent or important items.
Its impossible to buy a house without debt, If you do really well and can save 1k a month for a hozse you save 12k a year. Thats 120k in a decade. In a decade the 400k house costs 800k , so instead of 400k you have to save 680k now. You will keep saving forever...
Yeah, I don’t think Ramsey’s “rules” apply well to business. Imo it’s more strictly personal finance. Business is more nuanced, because personal assets rarely appreciate or have a return on investment (and should not be bought with the assumption they will). Most businesses can’t be bought or run entirely on cash. It would take a logger their entire working life to put together the $500k or so he needed to pay cash to start his business, if ever.
@yaykruser I don't think Dave has ever said you can't use a mortgage to buy a home. He says to have a 15-year fixed, and the payment shouldn't exceed 25% of your take-home pay.
The problem is logging rates has dropped so low that people like them are starting to starve! I’m assuming that 800k machine is a track cutter and it’s totally worth but their problem is they are cutting for a broker that is probably going in with no grease 😬😬 My boss is probably in debt a million or so in debt with his equipment but he is grossing 10 or 12 million a year because he buy and sale his own timber
The only other thing I would consider is life expectancy / repairability of the equipment. If you spent 400k and it had an expectancy of 10 years and the 600k had 15 it might be a better long term investment.
The definition of borrowing up to your eyeballs. If you ever felt stupid about borrowing money don’t. Just listen to the Ramsey show. And someone has 100x your stupid.
It won’t matter if an idiot earns a low or high income. Idiots will be idiots. Continually living beyond their means, drowning in debt with zero savings and zero retirement. 😮
I would keep personal debt and business debt separate. Then get a good accountant to help with the business so you get all deductions you can and retire debt through the business. I don't think Dave always gives the most practical advice for business like this.
@@SJ-np4cz It is true, many large corporations pay no tax at all, and those that do, pay little as the profit is only taxed at 21% and then deductions are made. In fact only 8% of all government revenue is made through taxing companies representing 1.6% of GDP - one of the lowest in the world. (IRS, OECD Tax Database, 2022) One reason that corporate income tax revenues represent such a small percentage relative to the size of the U.S. economy is the offsetting effect of tax expenditures. Tax expenditures include exclusions, exemptions, deductions, and credits that reduce total tax liability. In fact in 2020 alone, 55 large companies paid no tax at all in the USA (Institute on Taxation and Economic Policy analysis of Securities and Exchange Commission filings of publicly traded corporations) . Do some research.2
Did you even watch the video? The business is netting $300k even after all expenses, which would include debt payments. The equipment is also worth over a million dollars, they have a large equity position.
How did I know jade was gonna ask if the equipment is necessary in order to operate the business.. lol Also, why did she gasp at the $90k mortgage..? Smh
Yeah they are clueless and tone deaf. They are basically saying why can't you run a logging business without log trucks and chainsaws lol. Not even once did they say anything about increasing their income and expanding the business.
Kudos to this VERY YOUNG couple for being as far along in life as they are! I can’t even count the number people of a similar age that I know who are still living with (and living off) Mommy and Daddy.
@@derekrank4572 Yes, that’s the mindset of all those people I’m talking about. Big mooches just talking about all the money they’re saving. Have you considered that EVERY generation could have done the same? Only smart parents kick the babies out of the nest. Previous generations understood that they weren’t doing their kids a favor. Good luck to you.
She needs it for her business. She cannot go and sell it. You also have to take the cost of replacement parts if it breaks down. The newer one have a warranty, the older one wouldn't.
Warranties aren't magic wands that fix heavy equipment; the manufacturer could deny the claim, or accept it and take a month to repair. If the warranty is worth less than the downtime, the warranty is setting money on fire.
@@jimroscovius BINGO, Even Mark Cuban said that on Dave's show. Build slow, keeping in mind the house (bank) always wins in the end with debt. Don't be that guy!
It's so easy for Dave to say oh I pay for everything in cash upfront when he makes millions of dollars a year. Like not everyone makes that much money. I mean heck i personally don't make 6 digit figures and I am going to be honest and say I am not really sure how too. Yes I know you are all probably going to say get a better paying job then and yeah where I am at right now idk how to do that.
Well he put in the work to get where he is. He wasn't born making millions of dollars a year. That's what he's trying to teach. Instead of complaining trying listening. Maybe that'll help.
@@derekosgood3230 I am not saying he did not put in the work to so that and yeah I know people who make 6 digits put in the work. And yeah I know a big part of why I don't make 6 digits is cuz I don't put in the work but I would have to work harder because I just don't think I have the mindset or personality or even quite frankly motivation or serious interest in doing that. I say this because lots of things in my life have been a struggle and at the end of the day turned out to be failures.
Less income means you buy less or lower priced items. I doubt you make less than I do (under 20k) and I am debt-free. I pay cash for cars and recently cash-flowed some renovations to my home. I save for years to be able to do those things with cash.
first things first, get that government loan paid off, then clear out your personal debt, while you're making minimum payments on the machine, then get to the machine, I mean, that's how the snowball would work anyway (I've heard dave say in the past his exception to doing the snowball method is paying the government) and that machine is making them money. I think they're just so deep into it right now that I don't think she feels like there's a way out, but 2 years from now, they'll have it all cleared besides that one, which will be, idk, 450 by then?
She will be totally fine but really needs to improve revenue. Her equipment will last for a long time and its already bringing 300k profit. Also, she may have a tons of business deductions and the real profit BEFORE amortization could be much higher. Her situation is very different from many people calling to Dave, its a business debt, not her personal
Careful with cheaper equipment. If the breakdown costs and cost to the business with downtime supersedes that higher cost for the better equipment then it wouldn't make much sense. I had a cheap old work truck constantly breaking down, eventually sold it and bought a newer more expensive one. Looking back, wish I would have sold the old cheap truck years ago to save me in all the costs of breakdowns and downtime.
Ok As a business owner I know what it is like to go into debt for my business. I have partners that are spend happy, now they are moving back to my thought process.
Other than the cars, this situation doesn't seem all that bad. Mortgage is no problem and credit card is manageable. Why people view cars as a status symbol rather than a mode of transportation to get from point A to point B is beyond me.
How the system even allows people to get this much into debt (loans and credit cards) is beyond me. If they cant pay off like the first 20 or 40k of debt they should be cut off immediately
The "buck" stops with the person who works the system to get into this position. Personal responsibility has got to come into play here. You can't blame the system for people willingly getting over their heads in debt. If you tried stopping it, both borrower and loaner would join against you.
I personally like to buy equipment for next to scrap price and at least have some return or equity on the restoration of that peice. Where do you want to allocate your time? I sure would like to know what peice of equipment you are talking about. Need specifics.
Can you please not judge when people give you their debt numbers? Making sounds will not help when they mention their numbers. These people own a business and it’s easy for all of them.
Man, I am a pretty simple dude. I know people love the feeling of owning their own business, and get a thrill from "investing/expanding in the business". To these people, they have no problem taking on hundreds of thousands of dollars in debt, or even millions, because they are "building something". yada yada yada Me, I worked for a good fortune 500 company. Worked mon-fri, until 4pm with an hour lunch. For me, the THRILL came from working NO weekends, NEVER past 4pm, CUSHY (real) pension, ZERO debt, GREAT health care plan, 401K match (in addition to the pension), etc etc. Worked that job for 25 years, saved and invested, and was retired by 48. Married with 2 kids. All in all, still in great health to this day, because I really had no stress during my working years. These people who want to juggle debt, and "build" a business....go for it. We need those kind of people, I just wasnt about to be one of them. NO WAY!! Life is too short
And personally, I can't imagine going back to work for a fortune 500 company after working in / owning small businesses over last 20 years. That's a great thing about America - no 'best' answer about how to make a living. Can prioritize our own preferences and change over time!
@@indianatime , Very true! To each their own. Of all my high school and college friends, I am the only one retired, while they ALL still have a SOLID 15-20 years left. Some are part of the rat race, and others are "building" their own business. Crazy thing, is we are all about par on wealth and lifestyle, but they continually ask me how I am always traveling abroad, and vacationing throughout the year. They just dont get it.
Business debt is not bad as student loan debt. The caller can just sell everything, file bankruptcy but the student loan debt will have to sell its soul and still remain in debt.
Yeah, their payment on that machine must be massive. This all balances on his ability to operate that thing, if he gets hurt or has an accident and can't work they would fold up in a moment.
I sometimes wonder if people know what they're doing with such an amount of debt..... How can you sleep knowing you have 900k in DEBT! !!. Here i am wondering if im fine with 0 debt lol.
they kind of glided over the differences in equipment. Since it's a logging business I'd be asking like, are their significant differences in safety? Like would an employee be more at risk operating different equipment? Will they need more training? Does the machine produce as much output and at the standard of quality their business is known for to their customers? Is it efficient? Will they need to buy other supporting equipment/parts for upkeep? etc etc. I'm not in the logging industry but I assume these are all pretty big considerations when operating heavy machinery with potential for catastrophic injury or business destroying liability/mechanical failure concerns.
Im sweatting my $1500 dollar credit card and this lady has 900K in Debt. What happens when recession hits and the 300k net profit is 50k net profit. Time to sell the logging equipment....hahaha
