Today’s approach to Debt?

By Bruno Scanga Financial Columnist Today the traditional approach to debt means that each month millions of Canadians jump through financial hoops to meet their final obligations, paying their bills, cover borrowing costs and try to put something away into savings, investments, and retirement. Most Canadians manage their finances by doing two things: 1. Deposit their income and other short-term assets into chequing and saving accounts 2. Borrowing when they need to, through mortgages, lines of credits, personal loans, and credit cards. Sounds simple enough, Unfortunately, they usually receive low or no interest on money they deposit, while they pay high interest on money they borrow. Wouldn’t it make more sense if the deposit and borrowing were combined? Why not have every dollar you earn pay down your debts until you need to spend that money? All in One account. This this the most efficient ways to manage debt and cash flow. This account is where you can have your saving directed and applied to your debt. In using this account your savings and income automatically reduce your debt to save you interest. You can have a combination of borrowing with a fixed rate and another portion of your debt in an open line of credit. The fixed rate accounts can help provide payment certainty in arising environment. This approach can reduce interest costs and lower the risk of overspending in the account. You can create a tailored debt management system based on your needs: · Income · Lifestyle · Cashflow Surplus · (undesignated money left over at the end of the month) · Interest rate risk tolerance · Understanding a good debt versus overwhelming debt Fixed or variable mortgages rates – which on is right for me? If you are looking for a traditional mortgage, you may not completely understand between fixed rates and variable rate mortgages. Each has is own benefits and your choice will depend on your situation and your personal preference. Your best options are to shop the marketplace and ask your advisors questions to ensure the plan you are getting meet all your need. Chequing vs savings Instead of juggling between a chequing and a saving account, why not have an option where you can enjoy the best of both? Most banks want you to operate with multiple banks. It important to know that you are not maximizing your money by using separate chequing and saving accounts. There are solutions that can help you benefit from higher intertest rates of a saving account along with the liquidity of a chequing account. Always ask questions, never accept the plans until you are 100% satisfied this will do what you want it to do for you. Remember Comprehensive, Diversified Strategic Planning.