Know the Environment of Carrying Debt.

Last weekend my good friend had the occasion to operate a skid steer. He’s a land developer and asked the road builder he hired (a friend of his) if he could use the skid steer to clear a little bush trail on the lot at the end of the road. He knows how to operate the equipment but is not a “professional”. It was 2pm on Friday and the road crew were off early. He was all alone. While taking down a small tree (2-3 inches), the branch caught between the arm and the body of the skid steer. By sheer fluke (1/million) the branch bent around and into the arm where a hydraulic hose was held. The branch pinched the line and restricted the flow of fluid. A sensor tripped and shut the hydraulic system down while flashing the yellow warning lights in the cab. With the hydraulic system disabled he couldn’t lift the arm to release the pressure and reactivate the system. A classic catch 22. What made the situation more complicated was that the door would not open more than an inch… because the arm was too high. Finally, and not the least of his problems… his cell phone was 100 feet away in his truck.

We often find ourselves alone in situations that can easily be defined as innocent. We convince ourselves that there was “nothing we could have done to prevent it”. We stand as a victim of random circumstances. Who can foresee random events with its consequential falling dominoes? Random events such as… a Pandemic. How many people will loose their businesses and even their homes, cars, cottages due to a virus? Nobody could have predicted our current circumstances back in October 2019.

However, we don’t need to know the future events to be prepared for most of it.

I have been advising clients financially for several decades. Businesses have inherent risks that cannot be predicted beyond only a moderate level of accuracy. Too often I see new operators purchasing new cars, boats and toys after only six months as an operator. Over leveraging (too much debt) creates a situation where even the slightest shift of circumstances can cause domino negative consequences. They assume risks based on unprofessional assumptions, “how yesterday was… tomorrow will be”. One miscalculation and they are locked alone in a metal vault. Far too often I see drivers and operators make debt choices that have to be slowly repaid over a lonely decade.

Yesterday I sat with a client for nearly two hours. He was considering what his options were on his truck. He had a company lease that was done in November. He saved up nearly half of the value of the payout and asked if he should use it to purchase a new truck or buy out what he has been driving for nearly four years. First off I have to admit I get very few operators asking me advice when considering “upgrading” its only about 2% that ever ask advice. In the defense of some, they already know the advice I give and don’t need to ask me, most however, find out my opinions after they signed away the next half decade. I was honored to advise him the best path for his financial future.

Debt is a serious multiplayer of negative circumstances. It will lock you in a metal vault. Too many people think that banks and financing companies won’t borrow unless it can be safely repaid. That is simply not true. It’s a fine and fuzzy line. It’s usually safe for the lender, but not necessarily you, the buyer. Every operator (and Canadian for that matter) must learn how to evaluate ALL debt risks in life management. Not just in truck financing but also in home, car, furniture etc. If you consider the future choice between a $30,000 engine rebuild and a $180,000 truck debt you must evaluate the five years of debt one choice has verses the 12-18 months of the other. If someone uses debt, they should be in panic mode until they are free of it. PB and J until the final payment. The goal is debt free living, not continual revolving payments in life. The older you get, the less debt you should have.

Debt free living is like having a usable cell phone in a metal vault. It’s freedom!

My friend did get out of the skid steer. By turning the key on and off over an extended period of time he stumbled across a setting where he could slowly drive with limited hydraulics. He crawled to a neighbor and honked his horn for ten minutes… they came out and graciously pried out the branch from its pinch. It took a few hours but he got home. He found out some skid steer rules: always carry your cell phone, always have someone know where you are, never operate alone. Know the risks and vulnerabilities of your equipment and environment. An ounce of prevention and protection is worth a pound of loneliness.