Quote:
Originally Posted by Reef Pilot
Yup, sounds like your head is screwed on solid.... Probably don't have to tell you this, but when it comes to personal finance, debt is the enemy. I was never so happy (well, almost) as the day I paid off my last mortgage.
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Thanks.
I think it's about using leverage (debt) with good business sense. Leverage is a very powerful tool. There's bad debt and good debt.
For example, I can't afford to buy my home out right, so I have a mortgage. I buy a property valued appropriately and at the right time/price. I'm not stretching to buy more than what I need, so my mortgage is affordable, and I have enough savings/investments that can handle a rate hike at refinancing. It is forced savings compared to rent.
Another example, I need a car, I could buy it out right... or, I could take advantage of low interest rates. At 2.5% APR... (sometimes zero for other brands), well, I could make more return on investment than 2.5% by keeping my investments rather than cashing them out to pay off the car.
Taking out a line of credit against a property's equity to wisely re-invest... for example to add a bathroom or finish a basement... not to build a pool or buy a Jacuzzi... so long as it can be justified in increase in property value, or additional loan payments and interest is recoverable proportionately (cap rate) in rental income. (and no, in wall aquariums do not increase property value)
Of course, I stay away from bad debt... carrying a credit card balance is a horrendous waste of money. I don't think there's value in leasing vehicles unless it can be a tax write off item for a business... etc.
But yes, I am looking forward to a day long into the future when 40% of my monthly cash flow doesn't get sucked into mortgage payments! It's far far away, but it's a heaven I've heard of!