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Debt can cause stress, regardless of who you owe and what the money was used for. While we do not deal directly with mortgages and debt, we have discussions with our clients on how debt can be managed and fit into your long-term financial plan. Understanding the difference between good and bad debt is critical in ensuring your financial obligations do not overtake your ability to enjoy life.

Bad Debt

Some people see any debt as “bad”. When we put together plans for these types of individuals, we make paying down debt a priority, no matter what the interest rate. Our aim is to make sure that our clients feel comfortable, and that may involve advising them to forego investing or certain activities to focus on paying down their debt.

Some people are comfortable having a debt, so long as it does not have a large interest rate attached to it. Those people usually don’t like what we call “bad debt”, debt that has an interest rate above 5% or so. We take a look at both sides of your personal “balance sheet” to ensure that investments and the type of debt you hold make sense for your financial situation. Carrying a large debt load on your credit card or unsecured line of credit could put your financial future at risk, so focusing on these “bad debts” has two benefits: less liabilities, more free cash flow.

Mortgages and Lines of Credit

Mortgages and lines of credit typically involve the largest component of a family's liabilities. For younger families, mortgages are a part of life, but ensuring that these debts do not become a burden that drags into retirement is usually a priority. For couples who are approaching retirement, debt can be a major reason not to retire when the couple desires to do so.

We work with our clients to talk about the debt they currently have, a plan to help reduce that debt, and what type of debt may be appropriate for a given situation. We will work with your banker and mortgage broker to help ensure that the type and amount of debt makes sense for you and your family.

If you feel as though debts and liabilities are not a focus in your financial plan and you would like them to be, please give our office a call. We can help get you started on incorporating debt into your Quality Financial Plan right away. Our number is (403) 220-9808 and you can also reach us by email.