When undergoing a Financial Game Plan analysis, our clients often see the flaws if they continued on their current financial path.
We have all enjoyed a substantial increase in value of our homes and investment properties, but Australia’s household debt-to-income ratio is 190 per cent, which is one of the highest in the World.
There is an important difference between good debt and bad debt. Good debt is used to build wealth and there is no better example than an investment property. Bad debt, for example credit card debt, diminishes debt over time.
Our strategic advice in a Financial Game Plan will analyse and target paying out any bad debt, and then develop strategic steps to enable you to be debt free in retirement. This will ensure that you are not exposed to interest rate risk at your most vulnerable time.
In our Financial Game Plan Illustration, Martin and Tova had mortgages of $1,461,870 on their Paddington home, $218,777 on Tova’s Coogee Apartment, and $1,100,000 on their new Marrickville apartment. In total they had mortgages of $2,780,647 which was a major hurdle to them achieving their life aspiration of retiring in the next 10 years.
At their current rate of repayment, we calculated that Martin and Tova would still have debt of $1.5 million in 10 years, which was a major reason for their $31,000 per month cash flow deficiency should they choose to retire in 10 years. Martin and Tova’s Financial Game Pan provided a seven-step strategic advice to implement over the next 10 years.
The strategic advice would enable Martin and Tova to have paid out their mortgages within 10 years, and accumulate an additional $1.9 million in wealth than if they had continued with their current direction.
By following our strategic advice, they should have a positive monthly income stream of $31,250 in 10 years’ time to meet their desired living needs and annual overseas ski holiday costs.
Through professional advice on managing debt, Martin and Tova would be debt free in retirement, and instead of having a monthly cash flow deficiency of $31,457 they would have a positive monthly income stream of $31,250 to meet their living needs.
By utilising and following a personalised Financial Game Plan prepared by Lanham, clients can enjoy a life of debt-free or severely reduced debt, so they can achieve their life aspirations without the stress of outstanding mortgages or unnecessary financial obligations.
