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
• Tax Deductions