It's important not to overdo the debt thing either. Consumer debt for things we can't afford is incredibly expensive and dangerous, but prudent debt for a home mortgage, certain types of education, and the like, can be one of the best tools for wealth accumulation that there is. All debt is not created equal.

It's important not to overdo the debt thing either. Consumer debt for things we can't afford is incredibly expensive and dangerous, but prudent debt for a home mortgage, certain types of education, and the like, can be one of the best tools for wealth accumulation that there is. All debt is not created equal.

And I will also add that of course investors who bought 20 years ago are making out like bandits – what about the investors who bought 3 years ago? 4?

I agree that it's nice to own your home, and to feel free to paint the walls or replace the dishwasher and feel that it's an improvement to YOUR asset. But I'm trying to take a step back and ask if home ownership is ALWAYS the answer, which many people would have you believe. It is not – sometimes you are better off renting.

Great! Perfect =)

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That is the attitude that created the economy we are in today. STOP IT! It is the BIG LIE! The quicker you go into massive debt, the more risk you take on. It's a crap shoot; a few came out well ahead, but today millions of families are either on the edge or have lost their home, and a relative few were due to job loss.

Steve, I married the only MBA that is a worse budgeter than I. Still, I hate debt so much that I paid off a 15 year mortgage in under five years. I'm not rich (I do make a decent living), but it didn't involve sacrifice. I drive an 11 year old car because, well, it still starts all the time. I don't worry about status symbols. That's what it's all about, not competing with your neighbor, but satisfying yourself.

Quick calculations like this get us in trouble, as they aren't the true number. You would have to factor in property taxes, interest payments, interest tax deductions, potential tax on profits from the house (first timers need not worry), the cost of rent, ROI on difference in rent and mortgage payments (if any), real estate agents cut, cost of paperwork for sale, home improvement costs, etc., to get the real number.

Most people don't account for all the variables, so they don't know the true cost of anything. Some times all these variables make buying a house or getting an education the right choice. Other times, not so much.

An additional 1 Trillion in debt (as a country) and it's only April.

Or… is some debt not so bad?

I'm not trying to spark a political discussion – just raising the point that sometimes, debt is not a bad thing. Sometimes it's necessary to avoid worse consequences.

I think it's absurd to view debt or lack thereof as a black & white picture. In my opinion, every thing is shades of grey. One must examine the pros and cons of every situation and make a determination as to whether taking on debt is worthwhile.

Example: Let's say someone weighs 400 pounds, and their doctor tells them to lose weight.

They have a couple of choices:

1. Eat healthier. Obvious choice – but, it costs more as healthy foods tend to cost more than unhealthy ones
2. Exercise. Another obvious choice – there are actually different options here:
2a. They can join a gym (which costs $x/month more than they were paying previously)
2b. Buy some home exercise equipment (take on debt presuming that they don't have enough in the bank to pay for expensive equipment outright)
2c. Find some way to exercise for free (perhaps go on the Biggest Loser?). Not a likely realistic option for someone who allowed themselves to get to 400 pounds to begin with.
3. Do nothing and risk health problems and a potentially premature death.

Now, I know, the obviously response is “but it's for his/her health!!! that's worth it”. So why wouldn't education be worth it? If you can double your income by taking on debt, isn't that worth it? If you can lower your total cost of living by buying a house, isn't that worth it? etc.

My brother recently opened my eyes to a point of view, which drastically changed the way I view debt.

Don't look at debt as the amount of money you owe, look at debt as the amount of money you owe MINUS the amount of money that debt is worth in real dollars.

Another example:

Mortgage for $100,000, but the house is worth $105,000 – you aren't in debt – you have $5000 in net worth.

However, mortgage for $100,000 but the house is worth $95,000 – you are in net debt for $5000.

And education. Let's say you make $50,000 a year, and if you take a course that costs $25,000, you can increase your annual income to $65,000 a year. Sure, you take on $25,000 in debt… but you'll more than make up for it in two years. Obviously you can't sell that student loan to someone… except your new employer when they offer you that fat raise you wanted.

Same with other types of debt.

As to the notion of renting … when my wife and I decided to buy our house, our “living payment” actually went DOWN. Our rent at our 1-bedroom apartment cost about $50 a month MORE than our monthly mortgage payment for a 3-bedroom house (including tax/pmi/interest/insurance). Utilities actually decreased too since we didn't pay into a water pool despite low usage and our house is very energy efficient… Who in their right mind would say that building equity and being more energy efficient all at the same time as lowering a monthly payment is a bad thing?

All that being said, I agree that it's not a good idea to go into debt to buy the vast majority of things – a TV, for example. that 110″ HD projector would be sweet as hell to have in the game room – but is it really worth adding $5000 in debt to have? What are the real net dollars associated with having it? Do you have the sweet stereo system to power it? Got a bluray player and subscribe to HDTV movie channels or HD cable package?

Final thought: Be mindful of your decisions to take on debt or not to take on debt. Some debt is worth it (most importantly education and health), other debt isn't. Always weigh the opportunity cost associated with an action AND inaction. Both are equally important. Your decision to NOT act could end up costing you far more than your decision TO act.