Question from a reader -

Hey

Getting out of debt vs getting a kindle so I can always have good books handy to refer to? What would you do? One word answer will do :)

I

There's no one word answer to that. However, there's a four word answer -

Depends on your strategy.

I never got so much out of formal education, but I studied Operations and Project Management under Roger Warburton at Boston University. Amazing man, brilliant business mind, great insights.

We'd spent hours and days puzzling through operational questions, or project management questions, or whatever.

We'd talk about bottlenecks, slack, statistics, variance... intersections of morale, raw materials, scheduling, estimating.

Finally, when we were looking at any complicated question, we could usually narrow it down to 3 or 4 options that were optimized for one result -- cashflow, variance, cost, whatever.

And he'd ask the class, "So, class, which is the best answer?"

And people would debate, and answer, some favoring cost, some for capital investment, some against it, some for dividends, some for vertical integration, whatever.

When we finally ran out of steam, he'd say, "No, none of that's correct."

So we'd inquire.

And he'd say, "The right answer is that it depends on your strategy."

That's just it. There's no right answer to whether it makes sense to get some new gadget or investment that builds your productivity at the expense of debt.

And despite this, we kept falling for the bait and trying to pick the "best" answer -- it took months of this before we realized that there wasn't a "correct" answer, only one that's geared for a particular strategy.

Here's some questions that thinking through might help, though --

How much are you earning now?

What type of compensation are you making primarily (hourly, salary, performance, equity, investing, etc)?

What are your costs now?

If you had retired all your debt, could you earn more or go to a typically-higher-producing form of compensation?

How do you like your location?

How easily can you leave your location for another one, given your debt level?

With lower debt, could you make that transition easier? If so, what would it do for your costs?

How much do you psychologically dislike debt?

What interest rate are you paying?

How much more reading and reference would you do?

What are you currently doing?

And so on.

The answer to your question, dear reader, is that it depends on your strategy -- there's very few universals. "Don't encourage your business partner to marry a psychotic hooker" is a near universal, and "Don't get into fights with trillion dollar corporations with no ethics or oversight" is a near universal, but beyond that -- it depends on your strategy.