[MKSixer]

Originally Posted by dinonz

I would not gauge a persons wealth on their car. I think Warren Buffett drives a Toyota Corolla. As many have said, what people drive is often for other reasons and not reflective of their wealth or income - to a degree. I have a nice collection of exotics all paid for in cash, so that is a pretty good indication I'm not poor.

Although it's entirely possible to be asset rich and cash poor - you can have millions in assets, and no cashflow/income to support it (paying property taxes, vehicle insurance and maintenance etc.). Even being totally debt free doesn't equate to "living off the grid" and not needing income.

But also I've learned that being totally debt free is not always a good idea. Homes are also not a good investment if you have money, but are good for people on a more "normal" path in life. Buying a home at 25 with a 30 year note means forced savings. Every month you put your money into your home, and over the 30 years you eventually own it outright, and it's increased in value, and so becomes a good asset. I'm building a new home at the moment, and whilst I could pay cash and be "debt free" why would I? I'll end up with a home loan a bit over $1.5 million, at a cost of about $7K a month round figures. With that $1.5 million that I could have paid cash I'll invest in an LLC I know locally that pay 10% return on investment - so I'll make $150K, or about $12.5K a month in income from it. Even after taxes, it pays the home loan for me with extra cash in my pocket.

So before becoming debt free, check to see if you can utilize that money elsewhere to generate more income than you use servicing the debt. It's a bit of a mind-shift for some, but if the numbers stack up it's worth it. I think when I checked that about 5.5% was my magic mark - if I was paying more interest than that pay it off, but under that I was financially better off to invest the money and keep the debt.

This is why I don't pay off the ex-wife's home. The paper is practically free and the opportunity cost of losing the income from investing that sum isn't a winning option.