It’s only natural to be a tad nervous when it comes to debt. Most of us have been brought up with the opinion that financial debt must be avoided as much as possible. In this article, we’ll look at how to manage your debt, minimise your fears around debt and how to use debt to grow your financial wealth.

We’ve all heard the phrase “you need to spend money in order to make money”. This phrase is true when it comes to investing. Acquiring loans to invest in growing assets needs to be a well educated and well informed financial move.

When reaching a conclusion on whether or not to take on debt, the most important factor to be weighed is whether it’s within your financial capabilities. Subscribing to some classes of debt can be advantageous to your wealth, however, anything unsustainable will be damaging to your financial earnings. Debt needs to be manipulated and managed closely. If you are careless when it comes to a financial debt you could find yourself in a rut that can be very challenging to scale out of.

Once you’ve decided to take on debt for investment goals, the next step is to form a precise strategy for the administration and repayment of debt. One of the most effective ways of maintaining your financial debt is using an interest only credit facility. This will give you the greatest flexibility as it will only be necessary to pay the interest amount each month. You will still have the option to make additional payments, or additionally, build up your offset balance. Should your financial situation change for the worst, you should have built up a reserve to service the interest or loan repayments to prevent losing the associated asset.

Entering into financial debt will provide you with opportunities to invest in areas that would’ve been otherwise impossible. History shows us that taking out a loan to invest in assets such as property are one of the most successful investment strategies.

With interest rates at an all-time low, now is a good time to weigh up your options and consider taking on good debt. You must first strategically plan all aspects of taking on a loan and how repayments will be structured as to not financially cripple your day to day life.

With the hustle of property season afoot, one of the more important aspects that most home sellers forget is their tax position.

According to Mark Chapman, the Director of Communications at H&R Block, selling your main property remains free of capital gains tax. Still, numerous home sellers are putting that tax exemption in danger when they utilise their property to make revenue through renting out part or all of the home or operating a business from home.

“If you check one of those boxes, you may be forsaking part of your CGT exemption. This is because you cannot normally acquire the full primary residence exemption if you have utilised any part of your property to turn an income throughout all or part of the time in which you owed it,” said Chapman.

Chapman gave a number of scenarios for the desertion of this tax exemption. For an individual operating a business from home, the seller has to approximate the percentage of the floor area of the residence that is being put to use for the home-based business, as well as the duration of time that they are running the business at home. This also applies to homeowners leasing out a room.

For someone renting out their entire house while provisionally working away, tax law permits them to use the six-year absence regulation. This requires living away from home and earning revenue from letting it out for up to six years, as long as they do not acquire another principal residence in the meantime.

Chapman suggests sellers seek advice from an accountant to gain knowledge on exactly how much tax they are required to fork out.

“Either you or your accountant will have to do a difficult calculation to figure out how much of the profit upon disposal of your property is liable to be taxed,” he said.

“In most circumstances, this is the proportion of the floor area of the property that is set aside to make income and the time the home was utilised to produce revenue.”
 
Whether you’re seeking to purchase your first home, relocate, refinance, or invest in a property, a mortgage broker can assist. Utilise loans from a major lender and receive assistance with the paperwork. There is no charge for this service, so why wouldn’t you.

What is your financial situation? A newly discovered alternative financial service is taking off abroad that targets fixing your financial problems by means of psychological analysis.

Financial therapy involves determining the cause of the problem and deciding which aspects of your lifestyle or finance habits are the source of your troubles. There is a very high chance that you won’t find one in Australia, as financial therapists overseas don’t need a financial license to work (instead, we have certified financial counsellors).

Brad Klontz, an American published financial therapist, trusts that there are four separate money types, or ‘scripts’, that distinguish individual saving and spending habits. Do you relate with any of them?
 
The Loafer
For the Loafer, money is often viewed as a power that stirs up anxiety, fear or disgust.

These individuals may be concerned about taking advantage of credit cards or over-drafting their account.

They may self-sabotage their monetary success, steer clear of spending money on necessary and reasonable purchases or may carelessly spend so that they have as little as possible in their control.
 
The Devotee
Individuals who are Devotees tend to believe that a raise in income or an unexpected financial gain will solve their problems.

This may be linked with compulsive hoarding, unreasonable risk-taking, overindulgent gambling, working too much, overspending or uncontrollable buying.
 
The Economic Status
These types usually link self-value with net-worth.

They show competitive spending characteristics and try to keep up with the spending routines of others.

Individuals that compare money with status tend to be inclined to have lower rankings of well-being, self-actualisation, spirit and contentment, and higher levels of anxiety.
 
The Shielded
For some individuals, money is a very private topic, regardless of whether they have a little or a lot of it.

Those who are secretive with their finances may be developing harmful financial behaviours, such as cash hoarding or immoderate saving. This kind of person is connected to awareness, watchfulness, anxiety and the feeling of paranoia.

So, which “money type” do you relate to now and which one do you hope to see yourself associating with in the near future?

Experts have said that 2016 was the year that the Australian housing market would begin to fall, but there was little proof of this in Sydney and Melbourne where property values rose over 15% and 13% respectively.

The annual gains were encouraged by a sudden increase in prices over December after more modest gains in November—an outcome few had expected. With a capital growth of over 10% for 2016 across the five largest capital cities combined, it’s not hard to see why investors’ call for residential property has remained strong, in spite of regulators’ efforts to moderate demand by regulating finance.  

Combining gross rental yields and capital gains, CoreLogic says that housing as an asset class made a total annual return of 14.7% based on the combined capital cities results.

These returns would have been distinctly higher for Sydney and Melbourne (19.2% and 17.1% respectively). Putting this into perspective, the mean balanced superannuation fund gained about 7.2% over the same period and the share market was up by 7%.

Sydney was the more powerful performer, while Melbourne, Canberra, and Hobart were slightly down. Meantime, Brisbane and Adelaide recorded healthy but more controlled growth of 3.6% and 4.2% respectively. The weakest performer was Perth, down 4.3% over the year.

Regional Australia staggered along, procuring 2.8%. However, there were varying patches, such as Western Australia where mining town property worth has diminished considerably following the end of the mining boom.  

The rise in the value of apartments was much weaker than in houses. The other aspect to the versatile property market was that value gains in units were far more feeble than in houses.

“Melbourne house values are up 15.1% over the year, contrasted with a 1.7% increase in unit values, while Brisbane property values are 4.0% higher over the year, with unit values dropping by -0.2%,” reported CoreLogic.

However, the total outcome for the year shows that this housing pattern (which started in 2012) is lengthier and stronger than economists had anticipated.  

So exactly how long will the growth last? Forecasts are now insisting that 2017 will be the year that property growth struggles to advance. We are already seeing signs that banks are beginning to raise interest rates on some loans, although this hasn’t occurred yet for owner-occupiers.

However, banks are claiming this will happen even if there is a lack of an official rate increase from the Reserve Bank. Some new stock in 2017, especially in the apartment market, will also set some much-needed decreasing stress on prices.

Although the property boom is not likely to implode any time soon, perhaps it will noticeably shift in 2017 as the rise in prices begins to ease.