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The general rule, really, is more like borrow only for appreciating assets (often real estate, financing a new business) and not for consumables or depreciating
by CPLX 10y ago
The general rule, really, is more like borrow only for appreciating assets (often real estate, financing a new business) and not for consumables or depreciating assets.
But both your idea and mine are still rules of thumb, notwithstanding how much you wish to elevate yours to a different status.
- runeks 10y ago> The general rule, really, is more like borrow only for appreciating assets (often real estate, financing a new business) and not for consumables or depreciating assets. Note the gotcha: if enough people borrow money and buy something because they think it will appreciate, it will. In other words, according to your rule, speculation can make itself appear worthwhile.
- CPLX 10y agoThat's not really true. If everyone buys golf trips or ice cream cones the chance they will turn into appreciatirng assets is zero. That's still basically true for most things that look sort of vaguely like assets, such as new cars, appliances, and whatnot. Very few of the things the average person chooses to incur debt to acquire are even remotely plausible as appreciating assets.
- appleiigs 10y agoIf you pull out a corporate finance textbook, matching assets to liabilities will be covered. Matching cash flows will be covered. That is why I am elevating beyond being a rule of thumb. Using debt for appreciating assets vs consumables will not be mentioned. As an example, a car doesn't appreciate, but a loan for it is fine.