Money Mistake #4 - Not paying off non deductible "Bad" debt fast enough

The basic strategy for our clients is:

Pay off your non tax deductible home loan

Recycle that debt into an investment loan that supports appreciating assets - property, shares and managed funds. Over the long run, using your home equity to support other high quality growth assets will grow your wealth.

Lets say you have a 500k home loan at an interest rate of 6%. This costs you $30k pa after tax.

If this 500k loan was used to support an investment property or shares, this cost of $30k is pre tax. The net cost (that is, interest and other costs less dividends or rent) comes off your income tax return. The compounding effect of the difference between the 2 scenarios above, and implementing the second strategy, is enormous over a decade and totally changes your wealth outcomes.

Want to chat about it? I look forward to your email at [email protected] or call me 0403397060

Stay tuned for number 5 next week.