Don't let debt rule your life

Does your mortgage feel like it is strangling you? Or are you considering purchasing your first home, only to realise the mortgage repayments are nearly equal to your monthly take home wage? You are not alone.

Debt is a complex concept. While debt may be unavoidable for some, differentiating between ‘better’ and ‘bad’ debt is the first step to taking control over your assets. The second step is implementing a strategic plan to help manage and minimise your debt all the while building your wealth.

Debt in our opinion is 'better' if it helps you purchase wealth-building assets – meaning assets that are likely to provide an income and/or grow in value over time. 'Better' debt may also be tax deductible.

Borrowing money to purchase a home, an investment property or other assets like shares or managed funds, which should appreciate in value over time, is an example of how ‘better’ debt can help build your asset wealth. In the case of an investment property, shares or managed funds, the owner may be able to use the rental income or the dividends to build wealth or retirement savings through a SMSF.

The popularity of self-managed super funds (SMSF) is forever rising, with many people drawn to them for their perceived flexibility and reduced running costs. While a SMSF may be ideal for one person, it might be very unsuitable for the next. To be successful, a well thought out SMSF strategy should be in place. Click here to chat with Axios about whether a SMSF is right for you.

Debt may be considered 'bad' if it is used to buy assets that will fall in value, will not earn you any income and is not tax deductible. 'Bad' debt also includes debt incurred for things you do not need and cannot afford, like that trip to Tahiti, for instance.

Managing debt in general can be a difficult task, especially where ‘bad’ debt is involved. It isn’t always possible to avoid 'bad' debt, but it’s worth trying to minimise it, and if at all possible, avoid credit card debt that can easily spiral out of control. Click here to chat about making the most of your debt and how to take control over your assets.