Ah, the good old days of frugal Ben Franklin and mortgage-burning parties. If youâve bought into the old-fashioned notion that debt-free is the best way to be, Thomas J. Anderson offers some unusual counsel. In this compelling and contrarian book of financial advice, he walks through the reasons youâd be wiser to fatten your retirement account than to pay down your mortgage. His strategy focuses on the miracle of compounding interest: Redirecting cash to a 401(k) â or to a retirement account, for those not in the US â when youâre 30 or 40 means that money will have decades to grow. Anderson is suggesting a safe and sound way for responsible investors to stretch their nest eggs farther. While never giving investment advice, getAbstract recommends this how-to guide to new investors and savers.
Debt Is Not All Bad
Many financially savvy Americans regard debt with deep suspicion. Credit card balances and payday loans are losersâ games, according to financial gurus like Dave Ramsey and Suze Orman. This advice is accurate as far as it goes. Youâll never achieve financial stability by overspending or by paying usurious interest rates on consumer debt. But you could consider a more nuanced view of borrowing, one that combines the concept of âgood debtâ with the idea that many consumers are disciplined and smart enough to borrow rationally. The concept of using debt to build wealth doesnât mean you should embark on a shopping spree. Fancy cars, huge homes and extravagant vacations wonât lead most people to financial stability. Instead, debt is a useful tool only if youâre willing to spend less than you make.
Debt is risky, but it gets an undeservedly bad rap. Call it âanti-debt hysteria.â For a different perspective on how to handle borrowing, consider how companies manage their balance sheets. In the corporate realm, debt isnât evil; itâs just part of life. Of course, businesses try not to become heavily indebted, but they structure their obligations...
Thomas J. Anderson, founder and chief executive of Supernova Cos., a financial technology company, is also the author of The Value of Debt and The Value of Debt in Retirement.
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