Financing major life events

The big moments in life, from getting married through to retirement, are precious, however it helps to plan ahead financially for these special moments.

Often these events, which can include buying a home and raising a family, come with hefty price tags, and that begs the question: what’s the best way to finance them?

Usually that choice is between saving for something or going into debt, playing off instant gratification against delayed satisfaction.

Good debt vs bad debt

Going into debt can be a sensible way of funding some life events.

Borrowing at a reasonable interest rate to buy an asset that is likely to increase in value over the long term is an example of using debt wisely.

Generally, buying a home or investment property are good examples.

On the other hand, borrowing at a high interest rate to buy a depreciating asset – an unnecessarily expensive car perhaps – might be good for the ego, but not so good for your finances.

Debt has many uses when it comes to wealth creation but needs to be treated with caution. For many things in life, an old-fashioned savings plan may be the better way to go.

Long term vs short term savings

A major influence on the choice of savings vehicle is the time between now and when the funds will be spent.

The more time that you give your savings portfolio to work, the greater the investment ‘risk’ the vehicle can tolerate.

For example, a short-term goal such as a car or holiday is best suited to a risk-averse savings vehicle like a term deposit or a high interest savings account.

There are medium-term goals like home deposits, where you can include some growth investments in your strategy, since deposits can take years to save.

Then there are long-term targets like a superannuation investment portfolio that often feature a range of different investments, including property and shares that can rise and fall in value.

Over time, the long-term growth in the value of these assets will usually be more than enough to offset any short-term fluctuations.

How can LDB help?

Whatever the life event you need to finance, it pays to plan.

An LDB financial planner can help you clarify your goals, assess the benefits of debt versus savings, and run the numbers so you know exactly what is required to meet your goals.

We can even help with your lending and finance requirements, and we are, of course, experts in investing for the long term.

To find out more, call us (03) 9875 2900 or fill out the form below and let’s set up a time to chat.

LDB Wealth Solutions Pty Ltd is an Authorised Representative (no. 257930) of LDB Financial Group Pty Ltd ABN 83 161 933 777
Australian Financial Services Licensee: Licence Number 437164

LDB Superannuation Services Pty Ltd is an Authorised Representative (no: 1253818) of LDB Financial Group Pty Ltd ABN 83 161 933 777