Financial planning for your life’s milestones
Support for what’s important when you need it most
Good debt vs bad debt
Going into debt can be a sensible way of funding some life events.
Borrowing at a reasonable interest rate to buy an asset that is likely to increase in value over the long term is an example of using debt wisely.
Generally, buying a home or investment property are good examples.
On the other hand, borrowing at a high interest rate to buy a depreciating asset – perhaps an unnecessarily expensive car perhaps – might be good for the ego but not so good for your finances.
Debt has many uses when it comes to wealth creation but needs to be treated with caution. For many things in life, an old-fashioned savings plan may be the better way to go.
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Long-term vs short-term savings
A major influence on the choice of savings vehicle is the time between now and when the funds will be spent.
The more time that you give your savings portfolio to work, the greater the investment ‘risk’ the vehicle can tolerate.
For example, a short-term goal such as a car or holiday is best suited to a risk-averse savings vehicle like a term deposit or a high-interest savings account.
There are medium-term goals, like home deposits, where you can include some growth investments in your strategy since deposits can take years to save.
Then there are long-term targets like a superannuation investment portfolio that often features a range of different investments, including property and shares that can rise and fall in value.
Over time, the long-term growth in the value of these assets will usually be more than enough to offset any short-term fluctuations.
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To find out more, call us (03) 9875 2900 or fill out the form and let’s set up a time to chat.
Whatever the life event you need to finance, it pays to plan.
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