When does it make sense to pay down debt?

No doubt if you ask five financial planners whether it makes sense to pay down debt, you'll get six opinions. That's because it's not an easy question to answer.

Traditionally we associate debt with something negative.  Debt bad, money good, end of story. But this just isn't always the case.

I struggle with this every month: should I pay off my debts or leave my money earning in the bank? The reason it's not an easy question to answer is that for some people, having money in the bank (or some other liquid investment) is more valuable than having no debt--even if you're earning less interest.

For example, the interest rate on my line of credit is 5%. My liquid cash earns 3.25%. But to me, the spread of 1.75% is a small price to pay to know I'm a) using someone else's money and b) leaving my money untouched in the bank.

Of course, my attitude towards using my line of credit changes depending on the interest rate spread. If it gets above 2%, I start thinking its time to pay off those debts...even if I have to use my own money to do so. 

But once you've spent your money by paying down debts, the money is gone forever while the empty credit, waiting to be used, remains--to tempt ever more spending.

Something to ponder. There is no one answer that suits everyone--and if anyone tells you there is, get your financial advice elsewhere.

Why savings "fundamentals" can create slavery, not wealth

What are the fundamentals of saving money? We've covered many of them here on this site: eliminate unnecessary expenses, control spending, get money working for you, pay yourself first, and eliminate debts, to name a few.

But without a long term strategy in mind, the fundamentals of saving money and building wealth might end up enslaving you, not freeing you from financial slavery.

Save money, build weath: Please Read

Perhaps one of the most under appreciated aspects of saving money and building wealth is the need to do just what this post's title says: Please Read.

Learning how to develop money saving habits, while at the same time building wealth over the long term without sacrificing life's enjoyments today, is not someone anyone learns over night.

Variable rate mortgages or fixed?

Are mortgage rates going up or down? If you have a variable mortgage, should you lock in? Is inflation running rampant or hardly there? Contrary to what you might read, no one really knows. 

But when it comes to locking in a variable rate mortgage, or getting a new mortgage, I met someone who does know--and was willing to talk.

The Pain of Hindsight

Just over a year ago, Ford stock was hovering at about $1.50. Today, it's at $14.11.

When Ford was at this historic low, I considered dropping $30k into the stock and holding for a year or so. But...the stock rose to $2.00, and I wanted to wait for it to drop back down to the $1.50 range before buying--to maximize my return of course.