‘Good debt’ is tax deductible, this includes:
‘Bad debt’ is non tax deductible and includes:
You will also most likely be paying a higher interest rate on the credit cards and personal loans than for the mortgage. Deductible loans can help you reduce your tax, so consider paying of your non-deductible ‘bad debt’ first.
One strategy for paying off debt, championed by The Barefoot Investor, is to tackle the smallest debt first. While ensuring you still meeting minimum repayments for all loans, pay as much as you can towards the smallest loan. When that one is paid off, pop the champagne corks and set your sights on the next target.
Record your spending for a few months in each of the different categories of your budget and see how it stacks up. Free apps such as the MoneySmart Track My Spend app from ASIC can help you with this. If you find yourself getting into the habit of recording your spending, a rolling budget can be a great way to map out how your bill payments fluctuate over the year. You can also use your spreadsheet to keep track of any tax deductible expenditure, handy for tax time — just remember to always keep the receipts in a safe place.
The sense of satisfaction gained from meeting your goals , and the reducing numbers in the loan account will help you to strive for the next target and the next!
Disclaimer: The postings on this site are my own and don’t necessarily represent the views or opinions of Total Financial Solutions Australia (AFSL# 224954)
This information does not take into account the reader’s objectives, financial situation or needs. For this reason, before you act on this advice, you should consider the appropriateness of the advice taking into account your own objectives, financial situation and needs. Before you make a decision about whether to acquire a financial product, you should obtain and read the product disclosure statement.