The basic principal here is to pay off your private non tax deductible debt as soon as possible.

This is commonly known as “Bad Debt” because you pay for it with your after tax dollars. This means if you are a top marginal rate taxpayer, you basically have to earn $2 pre tax to keep $1 in your pocket after tax, which is then used to pay the interest on your bad debt, such as your private home loan or credit card.

At HYD Advisory Finance we can show you how making small changes to the way your home loan is structured may result in substantial savings in the amount of interest you pay over the life of your loan and help you pay it off years earlier.

“Good debt” on the other hand is debt that is used to invest in growth assets such as investment property. In this case, the interest is tax deductible, so if you are a top marginal rate taxpayer the after tax cost is almost halved.

The sooner you get your bad debt under control and down to a manageable level, the sooner you will be able to look at taking on Good Debt to allow you to invest in growth assets such as investment property that will grow in value over time and provide you with capital growth and passive income in retirement.