Finding Financial Bliss: Reimagining Debt and Investment Strategies for Long-Term Happiness

Is it time to re-evaluate your debt & investment strategy?

For many years the low interest rate environment has incentivised us to invest or contribute to super over repaying our mortgages.

With an opportunity cost lower than 2% for a brief moment of time and high earnings in investments (circa 10%+), who could blame you? The math’s of the situation was clear. Not to mention the extra benefit of a tax deduction for contributions to super on top of the difference in interest rates.

Now the tables have turned, and the impact is twofold. A rapid increase in the official cash rate has increased our cost of borrowing on top of a share market slump. So, what can we do about it?

Firstly, check your mortgage interest rate and call your bank to ask for a better deal. If you don’t like their offer, you can refinance.

Next consider if there is any way you can reduce your debt by shuffling cash around or by (shock horror) cutting back on your expenses. No more avocado on toast! Kidding.

Then think about your investments and if they still align to your long-term goals. Investment earnings may not be good this year but often perform in the long run.

Lastly, calculate the after-tax profit/loss of each scenario. It is important to compare like with like.