All I can say about Debt pretty much is Don't Do It!!!! Though with time my perspective has changed, and I learn more and more with time how debt can be used to my advantage (as opposed to the "never touch debt" rule). But I think it is important to start with the "no debt" rule when you are young.

It's petty much how I was raised, debt was just never an option. IT is always amazing to me the difference in my thinking compared to other friends/acquaintances deep in debt. The thing is when you don't consider debt an option, you find other options. I am more likely to consider working overtime or even working a second job temporarily to cover a shortfall whereas our friends deep in debt often feel like more debt is their only option.

When other parents talk about teaching their kids about debt, I think of just telling them it is never an option. Of course I was a pretty obedient child and it worked with me, and I understand the importance of making sure kids understand why debt is bad. But for me my parents got me a credit card with a $500 limit when I was 16 as a way to teach me about credit. & then they told me that I could put charges on it to build up my credit, but I had to pay it off every month. I never really knew you could do anything different so that is what I did. Of course my parents were big on me working, having a checking account as a pre-teen, etc., so none of this stuff was mysterious when I was out on my own.

My parents also handed out a couple of 0% loans to me as I grew older which helped immensely. $1500 for my first car which I worked all summer just to pay them back. But the experience was invaluable.

So when it came time to the real world pretty much debt was never an option. No one in my family ever borrowed money for cars, in general, so I didn't even realize that most people financed cars. Once I had my first car my parents taught me to save up cash for my next one. I've broken the rule a little as I did finance 2 more of my cars (the third one we downgraded to and paid cash for) but I paid them both off within a year, at 0% - 3%. I was always earning more money in the bank and puts my grand total of consumer interest rate paid over my life probably around $100-$200.

This anti-debt stance was so ingrained in me that if we lived anywhere else in the country I honestly think we would have paid cash for a home, or at least put significantly down more than 20%. Our first home was a condo though and it cost almost $300k. Saving cash wasn't exactly feasible in the area we lived and we wanted to buy in and ride the equity wave. So we made a debt exception for our first home, but a few years later and a few hundred thousand richer on paper I'd say it was the best move we ever made. When we moved out of the area we actually planned to buy our dream home with a $100k mortgage. Of course the market tanked right then (9/11) and we are lucky we only have a $200k mortgage today. But I do have to say we were so close to being mortgage free I could almost taste it. If we had really had a $100k mortgage we would have paid that sucker down fast. But since things didn't work out and interest rates are so low we have also learned to embrace debt and leverage in this situation. Our investments earn much more than we pay in interest so it is the only way I can really stomach it, well that and all the equity. IT just makes a mortgage such a different animal than other kinds of debt as I feel it will buy us much wealth over the long haul.

I always say that avoiding debt has saved us so much money in interest. But the money saved is so much beyond finance charges. The money saved is in the fact that when you have to save the cash first you don't consider buying the extravagant things that you really can't afford. I still scratch my head at while people don't think twice about their car payments. The money most my friends are putting to their cars we first put to a home and now to our IRAs. Our finances can be all equal but that small difference between us and the average american will save us hundreds of thousands of dollars over our lifetime.

Of course once you are debt free and rid yourself from the ball of chains of debt, don't knock it's ability to help you. We went shopping last year for a car and went to the dealer with a '1 at this price' ad. Having shopped in the past with cash and having very unpleasant experiences, the difference was night and day when we told them we intended to finance this auto. They even negotiated on the price a bit which just about shocked me. This was a completely different shopping experience. The thing was I was able to secure a 3% loan elsewhere, but we went and took the dealer financing just because we figured it would be easy. & then I would pay off the loan right away. You have to read all the fine print in this case, and I was a little wary but it did work out. But the decision to finance the car was just a convenience decision. I had no idea it would turn the usual pushy/annoyed salesmen (annoyed we would always refuse to buy more than we could afford), well it turned them into butter. I decided then and there I would most definitely finance my car with my next purchase (and pay it off the following day. ) It's a game but I think this was the first inkling I ever saw that debt can be used to your advantage. As I try to erase the layers of "debt is bad" from by brain.

I look at my mortgage now and it is still quite hefty. Though on the flip side we have a far nicer home and a far smaller mortgage than most anyone our age around here. Our anti-debt stance has made us unwilling to consider a risky ARM or put less than 20% down, etc., which has made all the difference. But I am starting to look at how much we can put in our retirement and invest if we stall our efforts to pay down the mortgage too fast. Quite frankly the interest is insanely low and I even have a CD paying more than the interest rate in my mortgage today, so it goes. We could really put all our effort to paying off our mortgage today, but it wouldn't be very productive, it would put us way behind on our aggressive retirement goals. The thing is I am sure we will pay off our mortgage early. Barring the unforeseen it is a pretty done deal. But in the meantime we have to look at the opportunity cost of prepaying our mortgage TODAY and it just doesn't make any sense. If my hubby got a job tomorrow I could easily see paying down the mortgage rapidly though. It's all relative.

So with time my thinking on debt has really changed. Right now I am in the middle of setting up a credit card arbitrage, borrowing at 0% to earn interest in the bank. I am surprised at some of the "debt is bad" crowd who would never consider using debt in a fashion that would profit them greatly. In fact, my credit card purchases earn me a 3% return throughout the year. I just think it would be quite silly of me to give up all this extra money and benefits in the name of "debt being bad." & so my feelings change and evolve with time.

So basically I can some up my post into 2 points:

1 - First, you have to not consider debt an option. Ever!

2 - Once you got #1 ingrained in your brain then you can realize that debt can be used to your advantage in some cases. & you would be silly not to take advantage.

Those are my two rules in debt. I wouldn't recommend overall #2 to anyone who relies on debt though. Then it can be a recipe for disaster. You really have to really and truly realize that you don't need debt to move on and learn how to use it to your advantage. But once you can do that it sure makes life a lot easier.

Which reminds me why Dave Ramsey is so great if you are getting out of debt, but I find his advice absolutely horrible as far as efficiently building wealth. But it's like Dave Ramey is step #1 and then once you truly get it you should be ready to move on and really start building some wealth.