How Important is Debt Management?
Debt Management can often be a minefield for clients with Banks incentivising consumers to keep their mortgages as long as possible with frequent refinancing to new 30 year loan terms. That’s before we consider Interest Free payment options, points incentives like frequent flyer points and “premium options” with bundled perks.
A lot of us have heard about good debt and bad debt and the classification for each can vary depend on who you are talking to. At the Bayside Investor we focus on (tax) Deductible Debt which are loans taken out to fund investments and non-deductible debt which covers Principal Residence debt as well as any consumer debt across Credit Cards, Buy Now, Pay later and Personal Loans.
How We Help
Clearing consumer debt from Credit Cards, Buy Now, Pay Later and any other personal loans is often the first step in any Debt Management Strategy. This is where we go back a step and assist our clients to review their cashflow, identify any potential areas for savings, and once we can identify a surplus, this can be put to good use in clearing any remaining Consumer Debt before moving on to build up savings and move onto the next steps.
Then for the big decisions.
Do I use my surplus to –
- Build up my savings?
- Pay down my mortgage faster?
- Invest in property, shares or other assets – using cash or debt?
- Make extra contributions to super?
This is not a one size fits all decision and unfortunately, it depends. Younger Clients may wish to focus on building up savings for a deposit, Clients in their 30’s and 40’s may prefer to focus on Investing and Paying down their Mortgage, and those in their 50’s and 60’s may elect to focus on paying down their remaining mortgage before contributing to super.
It can also be important to consider whether to use any cashflow surplus to pay down principal residence debt, or use that money to pay off investment debt.
Depending on a clients individual priorities and risk tolerance, we work with our clients to make sure that they are using the right strategies at the right time.
It is also important to consider a clients goals and timeline before working through a Debt Management Strategy. For example a client in their 30’s and 40’s will typically have over 20 years to pay down debt on any new investments while a client approaching retirement may have less than 5 years to invest which will inform which Debt Management Strategy is most appropriate for them.
What Else We Do
Call Mark
07 3524 8505
Email Mark
hello@thebaysideinvestor.com.au
Visit Mark
Ormiston & Coorparoo (By Appointment) 26 Raby Esplanade, Ormiston, QLD 4160
