A question that clients occasionally wish to discuss is the issue of debt. While being debt free is a great objective, it is important to distinguish between good debt and bad debt and to think in terms of achieving your overall financial goals.
Good debt can contribute to your wealth and happiness in the long-term. Investing in education, housing or your business, are examples of good debt that could help you increase your income and net worth and contribute to your happiness. The responsible use of debt to create valuable opportunities and more effectively manage your affairs can provide benefits to you.
Bad debt can be characterized as debt that does not add to your income or net worth and usually has a high interest rate and may last longer than the depreciating asset it was used to purchase.
A related question people ask is should we borrow to invest?
We discourage this high-risk practice and we have found that too often this approach is recommended by those who are guided by self-interest.
We advise clients to stay on course and do the right things with their money which can mean building an emergency fund, saving a good portion of income for retirement, funding various important life goals, and paying off debt as soon as possible. These simple and effective strategies can help you to gain financial peace of mind and accumluate the resources you need to support yourself and to bless others.
Call our team at 416.258.8907 to discuss how we can help you to manage your investments and achieve your long-term financial goals.
