“An investment in knowledge pays the best interest.”
Glide paths, like runway lights for airplanes, set a course and provide necessary boundaries. The runway is different at each airport so the lights are helpful markers for the plane. When it comes to personal finance, I have my own markers. I consider these foundational facts for your financial journey, the boundaries to keep us on course:
- All debt is not equal: There are different types of debt.
- Your rate of return for paying down debt is exactly equal to your after-tax cost of debt.
- Sh*t happens—Value liquidity.
- Yes, you can—save.
- Compounding matters to the upside and downside.
- The past is the past. Focus on the future.
- Behavioral economics matters.
Table 2.1 Oppressive, Working, Enriching Debt: You OWE It to Yourself to Understand the Differences
|Oppressive debt||Payday loans, credit card balances||Loan sharks, credit card companies||Oppresses debt holders and makes them continually poorer|
|Workingdebt||Mortgages, small business loans, low-cost student debt||Mortgage lenders, SBA loans||Has a real cost but enables things that might not otherwise be possible|
|Enrichingdebt||Debt that you choose to have but could pay off at any time||Mortgages or low- cost securities-based loans||May increase return, reduce taxes, and actually reduce risk|
All Debt Is Not Equal: Oppressive, Working, and Enriching Debt
Before we even begin our quest to explore ...