It's common knowledge that it's desirable not to have credit card debt, since the interest rates are usually pretty high (unless you have very good credit or get into a 0% balance transfer offer and are very careful) and they're usually used to buy depreciating, non-performing consumer goods.
Taking out loans to go to college may be all right, considering the payoff in added income is usually worth it.
On the other hand, the argument has been made that long-term, fixed rate mortgage debt is a good thing to have in the event of inflationary monetary policy. The reasoning is that your dollars will be worth less later, so your payments (in terms of today's dollars) will go down.
Though this may be true, I'd rather not have the debt than have “advantageous” debt like this. Your job may be secure, you may be healthy, and the money could indeed get cheaper through inflation. But what if you lose your job, you fall ill, or we enter a deflationary depression? Then the tides turn pretty badly. If you don't owe, then this isn't a problem.
So, this is why I pay extra on my mortgage each month. Free and clear is good when it's not clear that you're home-free.
I agree with you on that. I hate having debt. Even though my student loans are at 3.65%, I want them gone!
However, you still have to make sure you don't pay too aggressively on low fixed-rate debt. I made about 15% on my 401k last year, for instance. If I'd spent that money to pay down my student loans instead, in the long run, I'd have less net worth.
Although there is something magical about not having any debt 😉
John: Since mortgage money is cheap and the interest tax-deductible, couldn't you invest at a higher rate of return than what you save on your mortgage? Besides, in a personal financial crisis, money in the bank is better than a paid-off mortgage.
The argument seems like a risk tolerance debate. From reading other posts it seems that in many areas you have a low tolerance for risk. If you are able to sleep at night, then the POTENTIAL gains that you are giving up are worth it.
Debts are not created equal. Paying your mortgage off faster versus saving the difference for emergencies or other investments could prove to bite oyu back. That of course depends on if you have no emergency savings. Make sure you are prepared for a financial crisis before sending more money off to the banks coffers.
THC, I agree. I'm doing a little of both.
NinjaPigeon, yes. Magical is a good word!