There’s this idea of leverage of money, or making your money work for you. You have to find that delicate balance of not having too much debt, but at the same time having your money grow for your retirement.
In general, debt on “consumer items” or toys is a bad thing financially, because consumer items tend to depreciate quickly. Compared with debt on a house, where your interest payments are tax-free, the property tends to appreciate, and you are paying money that you can get back if you sell the house.
However, paying off a house isn’t very good leverage because interest on your primary residence is tax free, and the interest rates on houses tend to be very small. If, instead, you were to use the funds that would pay off that one house and use it as a down-payment on 2 others which you rent out. The result is some modest income plus paying down 3 properties instead of having just one.
There are a lot of ins and outs, but in general I’ve changed from wanting to pay down all my debt to only wanting to be debt free from consumer purchases and cars—things that depreciate instead of appreciate.
Sean
