Leverage = The Enemy

This whole financial crisis is the result of only one problem really. Too much leverage in the system. People borrowed money on the assumption it would always be available and they could delay paying it back indefinitely. That is never true. My advice to the extent you can follow it is to reduce leverage as quickly as possible over your lifetime. Pay down your house if you can. Pay down those student loans. Never carry a balance on your credit card. Don't have a car loan. Only buy what you can afford. I have always followed these rules, but I must admit on the house I did wonder if I was doing the right thing by paying down as much as I could (not fully there yet). The government does incentivize me to NOT do that by making the interest tax deductible. But, it is still the right thing to do. Even now, when you can borrow as cheap as ever and house prices are no longer absurd, I would still advise paying it down. The piece of mind of owning your home is worth it (or at least I hope it is) and once you have paid it off you can build wealth with a safety net under you.