GOLDEN RULES

North Harbour News - - YOUR LOCAL NEWS -

I think I am the only per­son in my sub­urb who hasn’t been door­knocked by our oc­ca­sion­ally sweary lo­cal MP David Sey­mour.

His web­site says he per­son­ally knocked on 13,000 doors be­fore the last elec­tion.

He’d have met an aw­ful lot of heav­ily-in­debted peo­ple then.

My neigh­bour­hood passed the $1mil­lion av­er­age house price mark way back in 2011, or 2012.

The $1m sub­urb club isn’t so ex­clu­sive these days. Ris­ing house­hold debt has helped usher many Auck­land sub­urbs into the club.

Sey­mour re­cently pointed out that pri­vate house­hold debt has risen to a record 168 per cent of house­hold dis­pos­able in­come.

As a ‘‘small gov­ern­ment’’ man, Sey­mour be­lieves in cut­ting tax rates so house­holds can pay some of that debt off.

For house­holds, like coun­tries, high debt brings risk.

Whether you have con­sumer debt (credit cards, per­sonal loans, car loans, etc) or mort­gage debt, Run a house­hold sur­plus Take your op­por­tu­ni­ties Pay off debt fast

you need to have a plan to pay it off.

Len­ders like you to be on their plan, be it three or five years for per­sonal debt, or 30 years for a mort­gage.

Re­pay­ing your debt on their timetable means they get their pre­dictable in­come stream.

Pay­ing off debt is one of the most per­son­ally re­ward­ing things you can do.

It lib­er­ates you, and your in­come. In­ter­est rates go up. No prob­lem. Your in­come is your own.

No longer will a tem­po­rary in­abil­ity to work, or a fall in in­come, threaten to have the debt­col­lec­tors around.

New Zealand’s done pretty well duck­ing fi­nan­cial crises in re­cent years, but should our luck run out, the peo­ple most at risk of fi­nan­cial ruin will be the in­debted.

There’s an SOS for­mula to pay­ing off house­hold debt, which is strangely enough, ex­actly the same one for in­creas­ing your sav­ings.

First, you need run a house­hold sur­plus.

That means ei­ther earn­ing more, and/or adopt­ing a life­style of ‘‘tar­geted fru­gal­ity’’, where you spend less in cho­sen ar­eas.

A sur­plus cre­ates the op­por­tu­nity to re­pay debt fast.

Creat­ing your op­por­tu­nity also also means know­ing your loan, so you know how to ac­cel­er­ate pay­ments with­out in­cur­ring break fees. If you don’t know how your mort­gage or per­sonal loan works, you may well be labour­ing un­der false im­pres­sions of the cost of early re­pay­ment, or not re­alise you can use pe­riod re­fixes to pay off chunks of cap­i­tal.

Len­ders gen­er­ally won’t help you cre­ate your op­por­tu­nity.

I re­mem­ber the day a cou­ple of years ago, when friendly bank staff pointed out we’d done so well clear­ing the mort­gage, the wife and I could treat our­selves to a cou­ple of new cars. They’d lend us the money.

Creat­ing an op­por­tu­nity can also re­quire ask­ing for help, bud­get­ing help, or help in deal­ing with some un­der­ly­ing is­sue that is keep­ing you in debt.

The last el­e­ment of the SOS is speed. Sim­ply put, the faster you pay off your loan the bet­ter. It gives the lender so much less time to en­joy the in­ter­est they milk from you.

So, get off their plan. Go onto the Sorted.org.nz web­site, use its debt cal­cu­la­tors, and see what you’re ca­pa­ble of.

123RF

Ask­ing for help can help cre­ate the op­por­tu­nity to deal with your debt.

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