Borrowing money is a bad thing ?

BOA, Washington Mutual(WaMu - everybody says Wa-Moo), Wachovia - familiar names to us as we see those names whenever we go past Sunnyvale financial district in California.

Local and foreign media have put so much focus on the financial crisis and analysts have provided us with details of the causes and effects.

Why were Asian banks not hurt as badly as Western (US, and European banks) ? Many attributed to the way money was spent by the banks. If you go deeper, it is really in the culture and education we were nurtured in since young.

As an Asian brought up in a traditional family in Singapore, "borrowing" money is typically seen as a bad action. It means you are "poor". It means you are "not doing well". Mom used to say:

"Don't take on loans and incur the interest rates. It's not worth it".

"Pay off credit cards bills all at once. Don't delay payment and get fined for it. Don't pay by installments and get charged interests."

"If possible, pay the bills (that can include BIG items like house and automobile) upfront".

So, is taking loan really a BAD THING ? Yes & No. Of course, thanks to the conservative teachings of Dad and Mom - I consider myself (and is) a risk-averse person when it comes to financial planning/investment. Also to the point I could not really understand - when some of the people I know (not so close that I could call them "friends") chose to pay 0% interest installment when they purchase a washing machine and a refrigerator from Courts. But when thought more objectively, maybe I can understand why. To them, it is not a matter of being seen "poor" or "rich" when they go by installments. They are using this ever-popular evil (especially in this turmoil times) word called LEVERAGE.

Similar to the Western culture (I don't know about Europe) eg in the USA, BEING IN DEBT may not necessarily be a bad thing. And they don't call it DEBT, they call it LEVERAGE. That is how people like you and me use loans to build credit. Till today, I don't know the specific dynamics behind this but put in simply - if you were to purchase an automobile today (say eg. a new Toyota Corolla cost only about US$16K), some people will advise you to go on a car loan even if you could pay the whole lump sum upfront. Because when you take a loan, and are able to re-pay the loan, your credit rating goes up? Then in future, when you want to borrow money for something more critical or important, you could get a loan more easily? Something like that. I told you I am not an expert in this!

Too much of a good thing becomes evil ! The cause of this crisis is the result of OVER-LEVERAGE!! I think the"ang-mohs" need to learn about being thrifty from Asians and Asians need to open up their concept of "borrowing" at the same time!

Then, all of us will be smarter in future.