"[My father's] most adamant instruction was that I should never under any circumstances go into debt."
Now that's a dangerous heuristic. Never purchase a house, car, education, or medical treatment, except with cash?
Now that's a dangerous heuristic. Never purchase a house, car, education, or medical treatment, except with cash?
"Never go into debt unless your benefit from whatever you buy using the debt exceeds the cost of the debt."
Examples:
A house generally appreciates in value. Usually worth going into debt.
A new car. Unless you gain somehow from having a brand new car (e.g. you're a movie star), you can get most of the value from a used car and avoid the massive value decrease.
A computer. As a hacker, you need your computer to create. Having a computer lets you make wealth that wouldn't be possible without one.
An education. Hopefully improves your ability to create value by teaching you new and interesting things :)
That's the kind of stupid debt the quote is talking about. If you can't save up $1500 to buy a good computer, you probably don't want it bad enough.
(i.e. it's approaching $5/gal in CA)
Surely you're not suggesting that people should take out loans for gas?
Maybe a better rule: borrow so your consumption fluctuates less than your income, but always save twice what you think you should and borrow half what you think you can, to account for how stupidly optimistic people are in the presence of easy money and compound interest.
pithy, I'm going to steal this if you don't mind. I like it a lot.
And even in a normal economy, I don't know about the house: going into debt basically means selling your soul to "the man". For the rest of your working live, you will be a docile, scared cubicle worker, because you can not afford to lose your job (bank would take the house, huge losses). Doesn't seem worth it to me.