Financial mismanagement is a major problem in business. Talented people toil in obscurity. More often than not, these struggles can be traced back to bad ideas about how to approach the money side of a venture.

The way someone manages a business is closely related to how they manage their own finances. Most of us could have used more schooltime on finance and less time memorizing our state’s governors – not to pick on my own teachers or anything… Mr. Alexander!

There are two mentalities when it comes to financial management. “Cash is king” folks don’t worry about consumer debt; they rely on it to finance “must have” purchases like “no money down” flat screen TVs. Their thinking: as long as you can make the payments, why not live a little? Grain of truth: cash truly is king in business. A strong cash flow does overcome many obstacles. There is a problem with the “cash is king” mindset though: debt-financed creature comforts bloat the monthly budget. Now you’re locked into high-income jobs just to keep the ship afloat. That’s a recipe for getting tied into corporate America, not for breaking free.

Then there’s the “debt is bad/live within your means” crowd. These folks use debit cards to buy a bottle of water or a pack of gum; the rest of us wait in line behind them. But you have to admire the fiscal discipline. They know what leaves their wallet and where it goes. The problem with this approach? Not all debt is bad. The “live within your means” lifestyle tends to be fear-based, the equivalent of a squirrel forever gathering nuts.

But here’s the problem: at certain points in your business career, you may see an opportunity that lies beyond your means. If you borrow in order to seize that chance, I consider that “strategic debt,” which is vastly different than “flat screen TV debt.” Both might end up on credit cards, but not all credit card debt is created equal.

Merge these two approaches. The “cash flow is king” mentality is valid, but requires a better appreciation of the difference between good and bad debt, as well as the fiscal discipline of “living within your means.” Meantime, the “avoid debt at all costs” approach holds you back when big deals do down. It’s too bad most people fall firmly into one camp or the other, because the two extremes make a good mix.

One of my first business mentors was Tom Turley. Tom ran a printing press called Turley Publications. He took a liking to me despite my obvious ignorance. During my last meeting with him, he made a point of saying: “Remember, Jon, it’s not how deep the water is, it’s how hard you can swim.” I took that to mean two things: you can handle some debt, and don’t be afraid of the deep end of the pool.

It’s not as simple as “good debt and bad debt.” It’s a continuum with disposable purchases on one side (such as vacations), and strategic purchases on the other (such as equipment to serve a client who just signed a service contract with you).

I financed my first computer on credit cards, back when computers were not as cheap as snowboards. It was not the best kind of business debt because I didn’t have any paying customers. I didn’t even know what a paying customer looked like. A couple of “live within your means” friends criticized me for that risk (though I noticed they had no crisis of conscience using my equipment). I’m not going to lie: it was a struggle to pay that debt down.

Taking that risk was part of my business education. I wasn’t a strong swimmer at first, but by God, I was in the water. Brazen risk is irresponsible, but strategic risk is the defining factor.

Want to buy Free From Corporate America or see reviews of the final published version from readers like yourself? The printed book is now available on Amazon.com with product reviews.

You can also get a discounted version of the final book in eBook (PDF) format, or you can pick up a copy on the Kindle. The published version of the book is significantly enhanced from the web version available on this site.