Manage your debt - Swim, Don't Sink!
Debt (borrowing) needs to be managed. Debt can be good or bad. It can be efficient or wasteful.
Good Debt
Borrowing to buy something that increases in value over the long term, e.g. a house – but at present even a house may fall in value in the short term. 
Bad Debt
Borrowing to buy something that falls in value, e.g. a car, a boat.
Efficient Debt
- Lower interest rate
- Flexible – able to make early repayments without penalty
- Able to be deducted from taxable income, e.g. a mortgage on an investment property
Inefficient Debt
- High interest rate
- High penalties for early repayment
- Paid from after-tax income
Questions to consider:
- Do you know the cost of your debt? How much interest will you pay over the term of your loan?
