Everyone likes ice cream right? Do you feel the same about debt?
There is good debt and there is not-so-good debt.
The not-so-good debt is the one that has a high interest rate and is not tax deductible. Examples of no-so-good debt includes credit card interest, personal loans and car loans. Too often I see clients with great cash reserves sitting in their bank earning 2% interest and they still have a car loan there costing them 12%-15% interest for the next 5 years. It makes no sense to me.
If you have the cash sitting in the bank then pay off your credit cards in full each month so you don't get stung with interest. If you still have spare cash and a non-deductible car loan then pay out your car loan.
And finally, if you have a home loan then consider setting up an offset account and dropping your remaining spare cash in there. This will offset the interest on your home loan and effectively give you much better returns than the 2% you are earning in a term deposit.
I also see people with home loans with interest rates way up over 5% when they could refinance and get a rate closer to 3.7%. A $500,000 loan at 5% refinanced this way would save $6,500 per year in interest. Or a whopping $65,000 over 10 years!
Get on top of your no-so-good debt and you will be able to eat a lot more ice cream!
Contact us if you would like some help with any of these concepts. General advice will cost you nothing but may save you a whole lot more.
Please share this with anyone you know that would like to get on top of their debt faster.