Cashflow & Debt Management

Understanding your cashflow is fundamental to being in control of your finances. At Donmont Capital, we are here to help you make smart financial choices and build a solid foundation for your future.

Our Approach

We provide the tools you need to review key areas of your spending to assist you in achieving financial stability.

At Donmont Capital, we want you to have a better understanding of your income and expenses, as this builds on the foundation for achieving your goals to create a brighter future

Good Debt vs Bad Debt

Debt can be a powerful tool when used wisely, but not all debt is created equal. Understanding the difference between good debt and bad debt is crucial for making informed financial decisions. Let’s break it down:

Good Debt

Good debt is an investment in your future financial well-being. It typically involves borrowing money to acquire assets or opportunities that have the potential to increase in value or generate income over time. Examples of good debt include:

Mortgages: Taking out a mortgage to purchase a home can be considered good debt. Not only does homeownership provide stability and security, but it also allows you to build equity as the property appreciates in value.
Student Loans: Investing in education through student loans can lead to higher earning potential and career opportunities. Education is an asset that pays dividends throughout your lifetime.
Business Loans: Borrowing to start or expand a business can be a wise investment if it leads to increased revenue and profitability in the long run.

Good debt often comes with low-interest rates, potential tax benefits, and the opportunity for long-term financial growth.

Bad Debt

Bad debt, on the other hand, does not contribute to your financial well-being and can hinder your financial progress. It typically involves borrowing for consumption or purchases that do not increase in value or generate income. Examples of bad debt include:

Credit Card Debt: Using credit cards to finance non-essential expenses, such as vacations or luxury items, can lead to high-interest debt that accumulates over time.
Personal Loans: Borrowing for discretionary spending without a clear plan for repayment can result in debt that provides little to no long-term benefit.

Bad debt often comes with high-interest rates, no potential for growth, and can lead to financial stress and limited savings.

When considering taking on debt, it’s essential to evaluate whether it aligns with your long-term financial goals and priorities.

Good debt can be a strategic tool for building wealth and achieving financial success, while bad debt can derail your progress and lead to financial hardship. Our team of experts can provide personalised guidance and strategies to help you manage debt effectively, invest wisely, and achieve your financial goals with confidence. Get in touch with us today.

Debt Recycling

Debt recycling is a wealth building strategy that leverages your existing assets to accelerate your financial growth.

At its core, debt recycling involves converting non-tax-deductible debt, such as your home mortgage, into tax-deductible debt, while simultaneously building investment wealth. This strategy may therefore enable you to use the equity in your home to invest in income producing assets or assets with more potential for capital growth. Furthermore, given that borrowed funds will be for investment purposes, any interest incurred will typically be tax deductible and therefore also providing potential tax advantages.

Although Debt Recycling can be a great option to accelerate your wealth creation journey it is essential that you seek advice to determine its appropriateness.

Before embarking on a debt recycling strategy it is important to consider your ability to service additional debt obligations, tax implications and investment suitability. Get in touch with our team today to discuss your wealth creation options.

Budgeting Strategies

Find Out Your Expenses

Understanding your expenses is the first step towards creating a successful budget. Start by tracking your spending over a month to identify where your money is going.

Categorise your expenses into fixed (such as rent or mortgage, utilities, and insurance) and variable (such as groceries, dining out, entertainment, and shopping).

Find Out Your Income

Next, determine your total income sources, including your salary, wages, bonuses, freelance earnings, investment income, and any other sources of income.

Calculate your net income by subtracting taxes and other deductions from your gross income. Having a clear understanding of your income will help you allocate your resources more effectively and prioritise your spending and saving goals.

Prioritise Your Debt

Debt can be a significant financial burden if not managed properly. Prioritise your debts based on interest rates, outstanding balances, and repayment terms.

High-interest debt, such as credit card debt, should be tackled first to minimise interest costs. Consider strategies like debt snowball (paying off the smallest debts first) or debt avalanche (paying off the highest-interest debts first) to accelerate your debt repayment journey. Allocate a portion of your budget to debt repayment each month to steadily reduce your debt load and improve your financial health.

Emergency Fund

An emergency fund acts as a financial safety net, providing you with peace of mind and protection against unexpected expenses or income disruptions.

A good starting point is to save at least three to six months’ worth of living expenses in an easily accessible account. Having an emergency fund in place will help you weather financial emergencies without resorting to high-interest debt or derailing your long-term financial goals.