RECYCLE DEBT TO REDUCE THE RISK

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Paying off debt instead of Investing, in effect, a decision to have more debt than would otherwise be the case. The more debt you have, the riskier your situation is. So the first question you really need to answer is: what’s an appropriate level of debt for your personal situation? Unfortunately, Australian households are the most indebted in the world and this has led to a pretty casual approach when it comes to assessing what is a reasonable amount of debt to be carrying.

Variables that will determine appropriate debt levels include age, current and future income, health, current and future tax situation, retirement goals, job security and, of course, tolerance of risk. These factors can be difficult to quantify but there are some basic rules of thumb we use to determine whether you’re ready to consider an investment over paying off your mortgage (we assume you have no other debt or investment assets)...

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