Leverage

Possibly a misuse of the term, in its strict financial sense. Anyhow…

For decades I’ve heard about the value or use of leverage. It’s most easily recognized in our homes, often bought with a small down payment and a big loan, so that even minor increases in home value in early years create impression of a big return on our actual expenditure.

Yet last year, when I took on several major home “repairs” (a loose term for work that included demolishing and rebuilding a decrepit garage), I couldn’t bring myself to take out a home equity or personal loan. Instead, I spent down “emergency” cash and withdrew longtime holdings from a taxable brokerage account to cover construction costs.  Looking at my accounts now, some months after final payments and inspections, there’s substantial but slow rebounding. It’s going to take a while to recover, maybe a few years of financial indigestion.

Yet I sleep better if I’m not in debt. Also, I felt as if (true or not) with the market near/at a peak, things could downswing into bear category reductions, maybe lasting a few years. So I might as well sell at the top, capture some gains, put them to work.

It seems to me that the Humble Dollar community values more a family’s steady if smaller gains rather than engaging in bold leverage plays. Am I right about this?

Or am I a chump to spend real money in hand if possible for major rehabs, instead of borrowing? It’s more than a moot question, as follow-on expenses are sure to arise, maybe roof or HVAC or another unforeseeable surprise.