CathInfo.com

The best method to build up wealth is the entrepreneurial Mexican immigrant method. Remember, the Mexican is illiterate in English, they likely have at best a 6th grade education, they come here without a penny. Yet in like 10 years they own a restaurant, a business, or make a good salary as employees. How is that possible? The answer is that they do not spend any money on pleasures till they have a business or the income and even then they do not waste any money. It is usually their children who will spend the money when Dad dies. The Mexicans start out living 2-5 families in one rented house and all get together and buy a truck which they  share till they have enough money to buy their own. They save save and save and sacrifice for the future. That is how it is done.

Mortgages on homes were always good investments because inflation paid the mortgage, people basically lived for free or actually made money. The key to borrowing money is that you do not borrow to buy items that depreciate. THAT is where people lose all of their wealth, financing their luxurious lives. Buying a small house in a good, safe neighborhood is a wise move. HOWEVER, it has to be an inflation paid mortgage. All excess money should ONLY be put into the business that produces more money than paying off the mortgage early. In other words do not use the money that could be applied to paying down the mortgage, to waste it on depreciating luxuries.

It is amazing how quickly just paying $200.00 a month of extra principle on a mortgage loan can save you. When mortgage rates had a huge drop years ago, we refinanced and lowered the monthly payments by a substantial amount.  But we continued to pay what we already had budgeted and the principle reduced very quickly.  We would have had the mortgage paid off in just 20 years instead of 30 had we kept to that schedule.

(We actually paid the mortage off in just 10 years because we received an unexpected inheritance.)

When we first started looking for a house, I kept hearing these "financial experts" say that we should always keep a mortgage loan because the interest is tax deductible.  I could never understand that logic.  The interest might be deductible to reduce federal taxes by a small percentage of the amount we paid in interest, but the interest we were paying was real money.  The savings by paying off the loan faster far exceeds the amount saved in taxes.  This was when I first began to think...maybe these "financial experts" really aren't looking after our interests.

You can also rent a home until you save 100% of your new home price, but then you have thrown away every single penny of that  rent.