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Monday-Friday 8:30-5:00

Phone: 709.634.4944

info@harbourfinancialgroup.ca

Corner Brook, NL

90 Broadway, A2H 4C8

Author: admin

INVESTING VS. PAYING DOWN DEBT

INVESTING VS. PAYING DOWN DEBT

It’s one of the most common questions we hear as financial advisors: I only have a limited amount of money left after paying my monthly bills. Should I pay down my debt first or save for the future?

First things first. We can avoid this decision altogether by being smart about taking on debt. Many consumers these days are falling into the trap of bad loan deals because they’re focusing only on whether they can “afford” the monthly payment instead of whether the actual terms of the loan make sense.

Our number one rule of thumb is to never take out a loan for longer than the usefulness of the item. If you plan to keep a new car for 5 years, you should have it paid off within those 5 years instead of taking a longer-term loan to reduce the monthly payments.

Here’s another common example. If I told you that in 15 years you’d still be making payments on the cell phone you have today, you’d tell me I was crazy. But that’s exactly what happens when we consolidate our consumer debt into mortgages, lines of credit, or other long-term loans. We pay for items we’ve long forgotten about over 10, 15, or even 20 years. If you’ve already done this, you’re certainly not alone – sometimes it makes sense to reduce your interest and get things under control. However, keep this rule in mind so you can make better choices about debt in the future.

If you need to decide whether to use the “extra” money in your budget to pay down debt vs. put away savings for the future, here are a few considerations:

1. The Hard Facts of Dollars and Cents. How much interest will you save on paying down debt vs. the amount of growth you could expect to earn through investing? Example: if you have a low-interest line of credit at 4.5%, but your investment portfolio has been earning you an average of 6% per year, it would make more sense to invest your money as long as you’re still able to make the regular payments on your line of credit. However, if your debt is held on a credit card at 19% interest, it would clearly be better to pay this off first. It’s also important to consider any penalties for paying off debt early, or other fees that may come into play.

2. The 5 Year View. If you’re chugging along, making the regular payments on your debt with a plan to pay it off in a certain time frame, should you withdraw money from your existing savings to pay it off sooner? The answer lies in whether you’d have the discipline to redirect those regular monthly debt payments to a savings account or investment portfolio once the debt is paid off. Making loan payments is a no-brainer. They’re not exactly optional and we skip them at the risk of ruining our credit. However, saving money is often overlooked because it’s totally at our own discretion. In this scenario, if you kept paying off the debt as planned, in 5 years you could be debt-free and still have your savings intact (hopefully with some growth from investing.) But if you withdrew your savings to pay off the debt and didn’t subsequently save the equivalent payments, in 5 years you’d be debt-free but have no savings to show for it.

3. The Emotional Toll. Do you worry about debt on a daily basis? Or are you stressed about your lack of savings for the future? The answer could be a combination of both. Everyone has their own priorities, and what’s right for one person may not be right for someone else. Although this factor can’t be quantified, it’s still an important question to ask. It makes no sense to save a dollar at the expense of your emotional health, so you may have to make the less-desirable financial decision based on what you can comfortably live with.
There is no “one size fits all” answer when it comes to financial planning. Regardless of which choice is right for you, the important thing is that you’re making a plan to get on track, pay down debt, and save for the future. Once you’ve established clear goals and time frames, you’ll be able to put the daily stress aside and feel confident that you’re set up for financial success.

Paul Stratton B.Sc.

Paul Stratton B.Sc.

Paul has been practicing as an independent financial advisor for over 22 years. Paul obtained a Bachelor of Science degree from Memorial University in 1976. He later entered the industry with his father, Tim Stratton. As a second generation financial advisor, he has built a very successful practice as his father did; putting customer’s needs first, and providing outstanding professional service. His reputation in the community is outstanding and he prides himself on doing things ‘the right way’ with everything he’s involved in.

Paul’s strong ethics influences everything we do in our company. We have developed a process for the clients that educates, provides service and attention to detail that we feel addresses what clients want. We have also developed a service plan that regularly schedules face to face meetings at the convenience of the client. This has been paramount to Paul’s success and it will continue to shape the direction of our company. The client always comes first.

Paul and his wife Betty have been committed to volunteering in the community throughout their lives. They are very proud of their 3 children, Julia, Matthew, and Daniel. In his leisure time you can find Paul on the golf course, trout fishing or spending time volunteering at his church here in Corner Brook.

Scott Shears CA

Scott has been involved in the financial services industry for over 20 years. He completed a Bachelor of Arts, Majoring in Economics, along with a Bachelor of Commerce from Memorial University in 1975. He then articled with a National Accounting Firm and obtained a Chartered Accountant (CA) designation in 1980. He lectured Business courses for Memorial University of Newfoundland, as well as the College of the North Atlantic in Corner Brook and worked for a National Accounting Firm for a number of years before becoming a Financial Advisor.

His on-going service to the Provincial Board of the Institute of Chartered Accountants, as a both past Chair, and a current board member, ensures a high level of integrity and expertise that serves both his Small Business and Individual clients. His CA background allows him to provide excellent Retirement Planning, Succession Planning, Tax Planning for all his clients.

Scott has clients across the entire province and has both Mutual Fund and Insurance Licensing. He has considerable experience with Group Health Plans as well as Group Retirement Plans. His goal is to provide his clients with the professional expertise and products needed to achieve all their financial objectives.

Scott and his wife Donna are very active volunteers in the community. They love golfing and are members of the Corner Brook Curling Club. On the weekends you can find Scott relaxing at his cottage in Rocky Harbour.

Scott Shears CA
Geoff Wareham B.Sc.

Geoff Wareham B.Sc.

Geoff obtained a Bachelor’s degree from Acadia University in 1998, completed the Canadian Securities Course in 2001, and the Professional Financial Planning Course in 2003. He prides himself on building strong relationships with his clients and providing professional service. He is a 5th generation independent business owner and believes in building a professional, independent advisory solution for his clients. He holds both Mutual Fund and Insurance licensing.

He has a clientele comprised mainly of individuals and small business owners.  In his practice, emphasis is placed on providing excellent service and educating clients in order to make intelligent decisions and his practice concentrates in the areas of investment, retirement and estate planning.  He works closely with each individual to develop an individualized financial plan designed to meet specific objectives. He has a network of other local professionals such as accountants and lawyers to cover all of his client’s specific financial and estate needs.

Geoff is a big supporter of local business and initiatives. He has been involved in countless local committees and fundraising. He currently volunteers as a Scouts Canada leader, is a founder/volunteer of the local Mountain Bike Trail Building Group, and is a Cross Country Ski Instructor at the Blomidon Trails JackRabbit program.