Debt Management – Good debt vs. Bad debt

Debt isn’t necessarily a bad thing. We often need to borrow money to buy large assets such as a home or other investments. These can be positive for your financial wellbeing as it will benefit you long into the future.

However, you also need to ensure you manage your debt and stay on top of your repayments such as prioritising your debt repayments.

How to use debt wisely

  • Only borrow money to buy assets or investments that appreciate in value and provide an income. This way you can usually claim the interest on the borrowings as a tax deduction.
  • Only borrow the amount that you can comfortably service i.e. make sure you can afford the repayments.
  • Pay down non-deductible debt as quickly as practical such as your credit card and personal loans.
  • Only use your credit card if you can pay it off at the end of each month in full.

If you use a margin loan for investment purposes, make sure you have a sufficiently large buffer to guard against a margin call and access to cash if you should receive a margin call.

Debt Management help?

If you would like more information on debt management, please download the free White Paper. If you would like advice on the best debt management strategies for your particular situation, contact Prudentia Financial Planning today for a free initial consultation.