Lessons From Dish Network
Charlie Ergen, the co-founder and chairman of Dish Network, is in a tough spot. After amassing $26bill in debt, Dish has to shore up their balance sheet while trying to negotiate with its bondholders. The latest "distressed exchange," in which the current bonds are replaced by new ones, often at a discount, has been rejected by Dish creditors.
So what happened? "Ergen binged on cheap debt when interest rates were very low, and now faces higher borrowing costs... He had been buying up spectrum to challenge Verizon and AT&T, while at the same time its cash cow of pay TV has eroded (from cord cutting)," according to an article in the Financial Times.
How does this affect me? Dish service is unlikely to be impacted, even if they default on the bonds or enter bankruptcy. But there are lessons in this story that we can apply to our own personal finances.
1) Don't paint yourself into a corner with debt and leverage. Charlie borrowed heavily to challenge Verizon and AT&T. Many homeowners got in trouble in 2009 when their adjustable rate mortgages reset higher. Manage your household debt conservatively. Your future self will thank you.
2) Be forward looking. Cord cutting impacted the Dish business model in a significant way. What kinds of changes or unforeseen events could impact your ability to live the life you want? Do you need to change jobs, learn a new skill, or create a side hustle to increase your future revenue stream?
3) Keep your options open. Renting instead of buying, keeping 6-9 months of expenses in an emergency fund, saving money in your 401k, and investing in index funds early and often, can give you the flexibility to make changes when needed. Stay nimble with your personal finances and you will have plenty of options to choose from.
