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Mark Huber, CFP
SetForLife Financial Services
Tel: 604-207-9970
[email protected] http://
www.HowToBeSetForLife.com
Cornerstone to a solid financial plan–wise debt management
Meet David
High expenses
Mounting credit card debt
Meet Terri and Sam
Ready to arrange a mortgage
Floating interest rate
Fixed rate
Meet Sarah
$10,000 in savings
Needs access for emergencies
Sound familiar?
70% concerned about rising interest rates*
75% haven’t reduced debt or increased savings in the past year*
Source: Maritz Research for Manulife Bank of Canada
Not all debt is bad
Expensive debt Credit cards
Regular debt Mortgages, lines of credit, car loans
Tax-deductible debt Investment loans
Remember David?
Credit card debt
Pay with bank loan or line of credit
Reduce interest payments
Out of debt sooner
David’s saving solution
Credit Card Interest
$10,000 X 20%
= $2,000 per year
Loan Interest
$10,000 X 4.25%
= $425 per year
Savings $1,575
Advice for David
Only spend what you can afford
Pay off your balance in full each month
Banking on your own interests
Terri and Sam’s mortgage dilemma
Fixed vs. floating rate mortgage
Study 5 year intervals (1950-2000)*
Better off with floating rate
Renew annually
Source: Prof. Moshe Milevsky, Professor of Economics, York Univ.
Advice for Terri and Sam
Consider floating rate
Lock in only to establish comfort level before moving to variable rate
Sarah’s savings
Wants access to her $10,000
Minimal debt
Concerned about retirement savings
Putting Sarah’s money to work
Non-registered investment
Security for line of credit
Access to cash in emergencies
Low rate of interest
Three problems, one solution
1. Convert expensive debt to regular debt
2. Reduce interest with a variable rate mortgage
3. Put savings to work
Flexible mortgage account
Save yourself a whole lot of money
Flexible Mortgage Account
Combine floating rate approach with savings of debt consolidation
Debts, savings and income in one account
Save thousands in interest
Access to money when needed
Tips for your ‘fiscal fitness’
Pay off credit card debt immediately Pay new charges in full each month Avoid retailer financing Avoid overpaying with interest traps Use windfalls to reduce debt Switch to variable rate mortgage Use credit card to pay monthly expenses
and pay balance when due
What you owe and what you own
Save interest today
Invest for tomorrow
Get on track with debt counseling
Speak to your financial advisor
