FERNWOOD FITNESS - PULSE eMagazine - Issue#7 - Flipbook - Page 56
Good debt. This type is taken on as a way to
build wealth in the long term. For example, a
mortgage enables you to do more than just
buy a home. Structured well and used wisely
it helps you progress in life by helping you
afford things like school fees or a second
property.
Bad debt. This type can suck you into a black
hole, diminishing your wealth over time. For
example, a credit card with high interest
(more than 22% per year) and ongoing fees
will be harder to pay down and become
costly if you can’t pay off the outstanding
balance each month.
Become a debt master
Applying proven and reliable strategies can
make you more confident with your finances
and better off — mentally and financially.
Pay off priority debts first
The debt attracting the highest interest
(usually a credit card) should be paid off first
to reduce the amount of interest being
added to the outstanding balance - especially
if it’s not tax-deductible.
Always repay the minimum amount
It’s on your statement with a due date. Pay it
to avoid a late payment fee, more interest
being charged and a negative impact on your
credit score.
Have and Use an Offset
account or Redraw facility
Money in an offset (or redraw)
account ensures you only pay
interest on your mortgage
minus the money in your
offset. The greater the offset
balance, the less interest is
payable.
Change the repayment
frequency using the same
amount
Mow down a mortgage by
changing the payment
frequency from monthly to
fortnightly, for example, using
the same amount. This equates
to making 13 monthly
repayments in a 12-month
period.