Why Becoming Debt Free Is Not A Great Idea!

 

We Don't Need No Medicine!

We Don't Need No Medicine!

I’m pleased to bring you a guest post by faithful reader and commenter, Larry Ludwig (bio below).  He writes a thought provoking piece about challenging the norm of becoming debt free.  You’ll be smarter after reading this, guaranteed!  Enjoy, and as always, feel free to debate away!  Rgds, Financial Samurai

You’ve heard the financial gurus like Dave Ramsey perform pasectomies on his show and Suze Orman with her numerous “I have 50k in debt” guests.  The gurus all say, debt is bad, credit is evil, and being debt free is nirvana, yada yada yada.  While I do think as a whole Americans have too much consumer debt, the goal of being completely debt free is actually a terrible idea. Let me be specific: buying things that depreciate with debt is bad, that big screen TV, new clothing or car.  Most of the financial gurus do not make this distinction and make all debt to be “evil”.

I believe Rich Dad/Poor Dad Robert Kiyosaki has said it best, “There is good and bad debt and being debt free is more risky than having good debt.”.  Now before you go off on my recommendation of Robert and his questionable background, I believe his statement is sound and correct.

The primary reasons are:
•    Opportunity Cost
•    Asset Allocation
•    Inflation
•    Tax Deductions
•    Arbitrage
•    Leverage

Get An Umbrella Insurance Policy – Your Teenager Is Going To Bankrupt You

I was driving downtown to drop my wife off at the museum when a car started drifting dangerously into my lane.  I beeped the horn to alert the driver and when I drove by, the teenage kid in the back seat flicked me off!  I didn’t have a long annoying horn, nor a machine gun type rat-ta-tat-tat beep.  All I did was beep once so we wouldn’t collide.  The father was reading a map and driving at the same time.

I have to admit that my blood started to boil and I was tempted to blast him a new one when their car stopped next to me in front of the light.  Instead, I buzzed down my window, stared intently, and told the kid, “Don’t embarrass your parents.  I beeped at you guys because you were halfway in my lane and didn’t even know it.”

The dad was still clueless as to why I was talking to his punk kid and he also rolled down his window to ask, “What’s up?”