Leverage and Reason

My dad was pretty conservative about money. Frugal, thrifty, almost stingy, but also very generous. He didn't need much for himself so he could afford to be generous with his children.

Here is what he taught me about leverage.

To get going in business, when you are young, it is OK to borrow as much as you can. If things go against you and you go broke you can start over.

But as you get older the right amount of debt is 50% of your assests. If you have a business worth a million dollars your debt should be no more than half a million.

If the value of the business increases then you can borrow to expand more.
If the value of the business goes down you need to pay off debt.
Always avoid overleverage. That can lead to bankruptcy.

Finally, as you get older, pay down all your debts. By the time you are around retirement age you should have no debt at all.

so...50% that is prudent,
Who puts 50% down on a house? Hardly anybody.
Usually the first house you use maximum leverage, and you are young, so that is OK.
But the people who keep trading up or refinance and take cash out are
COURTING DISASTER

Greed
Fear

What else is there?

REASON