Financial Adjustments Managing debt now pays off later Most of us will spend a significant portion of our working lives with some kind of debt, such as chiropractic student loans, mortgages, car loans and credit card debt. have never been lower. (As of June 2009, the current prime interest rate is 2.25 per cent). How well we manage our debt during our working years will play a large role in determining whether we’ll be financially prepared when we enter our retirement years. Below are some tips to help you manage your debt more effectively. O CREATE A HOUSEHOLD SPENDING BUDGET The best way to manage debt is to carefully control how much debt you take on in the fi rst place. Create a budget specifi c to your household income and spending needs. Then, closely track your monthly spending, for at least the fi rst few months, until staying within your budget has become a habit. Sticking to your budget will help to ensure that you don’t incur more debt than you can manage. Certain wealth management fi rms may have cash fl ow analysis forms that you can download to help you get started. Paul Philip, CFP, CLU and Nancy Philip,CFP,CLU,have been advising hundreds of chiropractors across Canada since 1992. Their firm, Fi- nancial Wealth Builders, is located in Toronto, Ontario. To learn more about building your wealth, visit their website at www.fwb-inc.com or contact Paul or Nancy at 416- 497-0008. CONSOLIDATE ATTHE LOWEST RATE If you have two or more loans, you’re likely paying different interest rates on each of them. One of the easiest ways to reduce your interest costs is to consolidate your debt at the lowest rate. Typically, your lowest-rate debt will be a loan that is secured by an asset, such as your home. If you have suffi cient equity built up in your home, consider a mortgage that allows you to access your home equity, such as a home equity line of credit. You can use this line of credit to repay your higher-interest loans. In this way, you’ll be bringing all your debts together into one account at a single, lower rate. Not only will this save you inter- est, but it will make it easier for you to keep track of what you owe and your progress in paying it down. PAY OFF CREDIT CARDS IN FULL EACH MONTH When used responsibly, credit cards can make shopping easier, allow you to collect re- ward points and provide protection on your purchases. However, given that many credit cards charge interest rates in the 15 to 20 per cent range, you should always repay your balance in full each month before interest charges accrue. GET ALL YOUR MONEY WORKING FOR YOU It’s always a good idea to set some money aside for a rainy day. But, in most cases, your rainy day savings earn less interest than you’re paying on your debt. Even worse, you pay taxes on the money you earn in a savings account, but use after-tax dollars to pay the interest on your debt. 20 • CANADIAN CHIROPRACTOR | JULY/AUGUST 2009 www.canadianchiropractor.ca ften, debt repayment represents one of our largest ongoing expenses. The good news today is that interest rates Paul Philip, CFP, CLU Nancy Philip, CFP , CLU feature
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