Sunday, December 19, 2010

The Problem with Debt....

The problem with having debt is that it focuses your financial efforts on your debts, not your investments.

Being debt-free has been a wonderful experience.  And one thing I have more time to concentrate on is my investments.

Before, being saddled with debt, my main concern was getting out of debt - figuring out how to pay off the debts I had, as well as keep track of them and make sure payments were made on time, etc.

Thus, the time I had to spend on my finances was spent mostly on debt-related issues, not my overall financial well-being or investing strategy.

To some extent, this is a good thing, as the average Joe will churn his investments down to nothing if he spends a lot of time playing with them.  You are better off to "buy and hold" quality stocks than to try timing the market or stock-picking or trend-spotting.

But being saddled with debt tends to focus your mind on debt and make you believe that debt is the most important thing in your life.  And not surprisingly, people on debt websites talk a lot about their credit score, as well as the best strategies for borrowing money.  The idea of having NO DEBT is alien to them - you always have debt, they believe, you just have to have a better strategy for debt to get ahead.

Bu debt should never be a permanent condition in life, and the goal, if you have debt, should be to get out of debt - once and for all, for all time, period.  Not even a mortgage.  Because having NO DEBT is better than having debt, even if the debt interest is tax deductible.

But, you have to be out of debt in order to see that.....