Five top tips on managing debt:

1. Have clarity in your goals

2. Let your financial plan support your decision

3. Understand the costs

4. Be confident in your income

5. Have the flexibility to cope with life’s changes

Whenever we enter a debt obligation, it is in order to support and achieve our goals. Whether this buying a new car or home ownership, understanding why this goal is important to our current and future lifestyle will get us on track to formulating our own financial plan.

Calculating what level of debt is right for us puts us in the driver’s seat when it comes to strategy and structure and is the beginning of our journey to financial freedom.

The costs of different types of debt, such as secured or unsecured lending can be significant, and interest rates and tax deductibility should always be considered in relation to our wealth creation strategy.

Income is key and confidence that it can be supported will protect our recently purchased asset from being in jeopardy. Reviewing personal insurances, such as Income Protection allows us take on additional risk, providing the confidence to dream bigger.

Locking into lengthy contracts, including the use of fixed interest rates or balloon payments have their advantages but take away our ability to adapt when life happens. Remember to stay in charge and be careful of the price you pay when selling your ability to be flexible.

Debt is an important tool through our individual financial journeys, allowing us to build wealth in ways that would otherwise be impossible. Our goals guide our decisions and our financial plan will tell us what products to use and when.