Читать книгу Sort Your Money Out - Glen James - Страница 15

I hate debt. The thought of something or someone hanging over me that can cause me to change my situation or strategy without my control just irks me. I do have a mortgage on my home; and the mortgages on my investment properties are principal and interest loans (I talk about this in chapter 7) because I want the debt paid as soon as possible.

Now I am not a debt junkie. I don't believe in consumer debt or ‘bad’ debt. I don't even like using a credit card, like the ‘financially savvy’ people out there who use cards to get points and pay them off immediately so no interest accrues, blah blah … I just don't want crap hanging over my head.

When I read books about people who have purchased a million properties in 10 minutes and so on, I always think, ‘Why wouldn't they de-risk and de-stress and only have half the properties without any debt?’ Anyway, this isn't about my property debt philosophy — I am just using this opportunity to drive home the fact that I don't love debt however ‘good’ it is claimed to be.

When you hear other ‘money people’ talk about ‘good debt’ and ‘bad debt’, it can be summarised as follows.

 Good debt: Debt where the interest is tax deductible as the debt is secured against an appreciating asset. Likely to be used for wealth creation and has a low interest rate. Sounds good!Examples: investment property mortgages, a loan to buy shares, business loans

 Bad debt: Debt that has interest (usually quite high) that is not tax deductible and the debt is not secured against an appreciating asset or any asset at all. Sounds bad!Examples: car loans, personal loans, buy-now-pay-later products, credit cards, interest-free store cards

I believe there is a third category of debt, which I like to call ‘life debt’. This debt is sometimes just part of a functioning life in our society. This type of debt is not tax deductible, but it doesn't fit into the two traditional good/bad categories of debt.

The two main life debts I am talking about are your home mortgage and your HECS/HELP debt. Some might even categorise HECS/HELP debt as ‘good debt’ as this debt is secured against an appreciating asset (you, the income earner), but it is not tax deductible. Ideally, your home mortgage should be linked to an asset that is increasing in value over time, but this is also not tax deductible.

While I don't know everyone's situation, it is safe to say that your initial focus should be on clearing all consumer debt, or ‘bad debt’, and resolving not to enter into debt again in your life. I honestly believe that if you are consumer-debt free, you have your financial foundations in place (more on this in chapter 3) and you have leftover money in your spending plan, then you should get personal financial advice from a licensed adviser about whether paying down your home mortgage or investment debt is beneficial to your personal circumstances compared with investing elsewhere or making extra contributions to superannuation. I won't (and can't) give a one-size-fits-all answer to this type of ‘life debt’ because it will depend on each person's individual circumstances. As I mentioned, my own home mortgage and investment property mortgages are all principal and interest loans. I don't pay any more than the minimum, but I am investing elsewhere and I maximise my superannuation contributions each year. This works for me and my personal circumstances right now, but it might not work for you.

If you no longer have any consumer debt and you'd like to be connected with a licensed financial adviser, check out the resources at the end of this chapter. If you already have a financial adviser in your life, once you're free of all that bad debt it might be a good time to go back to them and talk about the goals for your financial life.