How do YOU view debt???

[Karen M.]

Hello all you smart BP people!

I have a question for today:   How do YOU view debt?    

Here are some sub-questions that you can pick and choose from to add to the conversation:

--> What are your personal "rules" about using debt for your investments? Do you have limits?

--> How do you make debt work for you? 

--> What practices do you put in place that give you peace of mind? 

--> Have you ever been on the edge with debt or struggled with it? 

--> What have you learned from managing debt?   

--> Do you believe in --  own nothing, control everything?  Why or why not?   Is there any greater truth to -- own everything, control everything? 

--> Do you feel there is a difference between personal debt (credit cards, car loan, home mortgage) vs. investment debt vs. business debt? 

Thank you for the conversation!   

Some of you may know from another topic that I am an avid listener of the Dave Ramsey podcast.  Dave is a 100% cash person, and suggests that investors pay off all personal debt and then buy their first rental with all cash, a cheaper home, and that that's a good learning experience.  He also recommends that businesses build up with all cash, often taking a deposit on a sale if materials are needed in the startup phases.  I am personally contemplating how much debt I am comfortable working with and trying to find a balancing point that I can feel very confident with.  :)   

(P.S. I currently have a home mortgage (about 100k equity) and a margin trading account for options and stock shorting to enable certain types of trades that sits largely without use.  I am comfortable with both of these positions, although I am seriously considering paying down the home mortgage.) 

P.P.S.  I cracked open a Ken McElroy book last night to start brushing up. 

[Richard C.]

Debt is an incredibly valuable tool.  Like a chainsaw.  And like a chainsaw, it can be both dangerous, and very much not the right tool for all situations.

Ramsay would have us using only axes to clear a forest.  That will work, I suppose, but it will take forever.  And axes have their own dangers.

Debit is a tool, use carefully where appropriate.