On Wed, 20 Aug 2008 17:28:03 -0400, John H.
salmonremovebait@gmaildotcom wrote:

I've never understood the advice to pay interest for the tax break. Where
is the break in giving away $1 to get 30 cents back? Seems like 70 cents
got lost there somewhere.

I can understand holding debt while building a savings account, but once
the cushion exists, I can't see the reason for it.

It's all a business decision. The interest you pay on a loan is the
cost of renting money. For certain types of loans like a home
mortgage or a broker's margin loan, you get to deduct the interest
payments. How much that deduction is worth depends on your tax
situation but the net effect is to reduce the effective cost of your
money "rental".

The next part of the equation is how much you can reasonably expect to
earn with the rented money. That depends on your skill as an investor
and what happens to the economy going forward. If you can reliably
make an annual return from your investments greater than youur
effective (after tax) cost of borrowing, then you come out ahead. The
downside is that if your investments don't work out you still owe the
money that you borrowed. That's the magic world of leverage,
wonderful on the way up, miserable going the other way.