Cash management and debt management
Consider the following money management and debt management scenarios. Do they sound familiar?
Many consider a mortgage “good” debt because it assumes the underlying asset will increase in value over time. Another example of “good” debt is borrowing to open, grow or buy a small business. Student debt also qualifies as “good” debt because the ability to work in a professional career or trade should provide a higher income.
Although none of the foregoing examples of cash management and debt management guarantees financial success, there is at least the possibility for future growth and profits. Conversely, borrowing money to fund something that decreases in value is considered “bad” debt. But, who hasn’t borrowed money to buy a car, pay for a vacation, provide emergency funds, purchase holiday and birthday gifts, etc.?
Personally, I don’t like the term “bad” debt because it implies a negative judgment of the person who has incurred it. Moreover, in today’s world, debt is a reality for many of us.
However, cash management and debt management is an area where a family can jeopardize their financial security if they get off track. A Financial Advisor can help families put their financial house in order.
For example, when I look at my clients’ income, assets, debts and monthly expenses, I can identify threats to long-term wealth and opportunities. I bring a new perspective to cash management and debt management and use lesser-known tools to pay off the debts and have savings for emergency funds, new vehicles, and yes, vacations!
If you are a home owner and have a mortgage, together we look at how your property and the mortgage on it, can help you to unify all of your other debts and to pay down the debts and the mortgage as quickly as possible. A traditional mortgage and separate bank account do not give you the opportunity to use the fluctuating cash balance in your bank account to offset the principal on which your mortgage interest payments are based.
If you qualify for it, an “All-in-One” account such as that offered by Manulife One http://manulifebankmortgages.ca/home/ allows you to put all of your income and debts into the one account – at the beginning and end of each month you can clearly see the total status of all of your borrowing. Real time cash management and debt management!
Unifying debt and managing cash flow through an All-in-One account is more efficient than having separate debts and chequing accounts.
I also focus the family’s attention on their cash flow and the monthly spending which is under their control – unconscious spending often translates into no extra cash at the end of the month.
We’ve all heard the adage “Pay yourself first.” Yet few of us have a system for cash management and debt management. TV, radio, newspaper, magazine, internet and billboard ads all nudge us to buy the latest whatever. Our elementary, secondary and even post-secondary level education system do not include any financial management courses. As well, the Canadian economy is fueled by consumer spending . Yet, if we cannot control our individual spending, like the proverbial hamster running on wheel, we are almost guaranteed to be life-long borrowers.
Intrigued by the possibilities? Give me a call at 416-939-2000 and let’s see what possibilities there are to get you off the spending and debt wheel. Not everyone qualifies for the All-in-One account but fear not, I have other strategies that may work for you instead.
It’s just good advice.