A bit more background- she saved up and bought her own car, and while she was living at home with her parents through high school she was expected to pay her own way. She has 0 debt of any kind, and lives in a one bedroom efficiency. Far, far too many people live off of student loans when they could be working. But, for those who have extensively researched their field, have chosen the lowest cost option, are working to offset as many costs as possible, have taken out the 0 interest loans while in school offered by the government, it’s hard for me to understand putting off an education that will substantially increase one’s income- especially when you are saving in advance to pay it off.

Like you said, it is a highly-subjective matter and everyone has their own opinion on it. I just cringe when the “no debt” philosophy takes on rigid dogma and cannot accomodate natural deviations that are well thought out, and that is what she’s experiencing from her family (who also subsidized portions of their degree with student loans, before they were converted to Ramsey, haha :)

Just my opinion, though. I’m going to encourage my own children to take the “wait and earn” route.

I’ve never heard it stated quite so well. Nicely put.

I am a big fan of the good debt/bad debt dichotomy. Currently, I’m paying on three mortgages – one for my home, one for my previous home (now rented and producing cashflow monthly) and one for a manufactured home (also rented and cashflowing). I consider this good debt because I am making a much higher rate of return each month than I would be in either stocks or CDs. Also, since the properties are rented for more than the expenses, my tenants are essentally paying off my mortgage. In return, I provide a nicely kept, safe house at a reasonable price, and if something breaks, all they do is call me instead of fretting about it. Once again, it is debt that is allowing me to increase my income.

Most people don’t use debt wisely, but that doesn’t mean that people who use debt aren’t wise!

Though people have taken both those examples to the extreme and found was to have really bad home debt, and more commonly, a ton of bad student loan debt.

Thanks.

Steven Venti & David Wise, “Choice, Chance, and Wealth Dispersion at Retirement,” NBER Working Paper #7521 (Feb. 2000) studied the relationship between income and wealth for the National Bureau of Economic Research, using Social Security lifetime earnings and net income assessments for 3,992 households whose heads were near retirement age. They found that there’s a huge variation in wealth at every income level. Many low-income families have almost nothing, but the same is true of many high-income families. Some of the lowest-income households had managed to accumulate significant amounts of wealth. Being number crunchers, they identified several factors that explained wealth accumulation:
* 5% of differences in levels of wealth accumulation were due to income differences.
* 4% were due to luck/”chance events” like inheritances, medical bills, marital status, number of children.
* 8% was due to investment choices.
* The rest was due to how much the families saved, their lifetime savings rate.

Those who accumulated large amounts of wealth were overwhelmingly the ones who made saving and investing a priority, regardless of their income level, individual circumstances or choice of investments. Those with high savings rates who ALSO had high incomes, good “luck” and wise investment decisions managed to supercharge their wealth accumulation, but the key was the sustained savings rate.

…and the key to a sustained savings rate is managing spending.

He says that if you can find a way to lock your money in a low interest debt over time you should, since the “guaranteed” rate of return would be the inverse of inflation. Any idea what that rate would be? If you can easily invest it at a higher rate, than I suppose this advice isn’t that useful.

Does anyone else have any interpretations of Schulich’s advice?

I foresee no new debt in my future, but if I did take any on, it would be with a specific, definable, and low-risk goal in mind: borrowed capital for a business is all I could possibly foresee, and even that I’d rather avoid.

Yes, this is a relative truth, and can be undone by poor discernment and a risky investing attitude, but those should be dealt with separately. I want my guiding principles to assume maturity and good judgment, and not coddle me too much.

We were very close to purchasing a new car a few months ago and are now soooo glad that we waited a while to think it over.

Car loans are definately not “Good” debt!