Noel Whittaker's Blog Welcome to a new year – it has certainly started off with the huge degree of volatility. Much of it is due to uncertainty about economic conditions generally thanks to Trump, Brexit, and the ongoing conflict between America and China.
But as we move into 2019 with all its hope and uncertainty, remember that there is much more to taking care of your finances than merely watching the markets. A good metaphor is an injured leg due to a sporting mishap – naturally you would pay particular attention to that leg, but you would be foolish if you became so focussed on it that you neglected all the other aspects of life.
Start by analysing your debts. As you list your loans, enter the interest rate and the monthly payment next to each one, and then separate them into those where the interest is non-tax deductible (for example your home loan and personal loans) and investment loans where the interest is tax deductible.
Tax-deductible interest costs much less than non-deductible interest so check that your deductible loans are on an interest-only basis to maximise the funds you can plough into your non-deductible debt. The optimum payment for your home loan is $12 a month per $1,000 (for example $2,400 a month on a $200,000 loan) which will have it paid off in less than 10 years with minimal interest.
If you’re stuck with personal loans and credit card loans, attack these first as they carry a much higher rate of interest. Use all your spare money to pay off the smallest loan quickly and, when that is out of the way, use the repayments no longer needed for it to speed up repayments on the second smallest non-deductible one. Do this and you will be amazed how quickly you will start pulling yourself out of debt.
Finally, never forget that becoming wealthy is not a matter of how much you earn but how well you use the money you do earn. Your new year’s resolution should be to make 2019 a year when you structure your finances to make the most out of every dollar you earn.