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OakvilleBeaverBusinessGlowing openingManaging debt keyto financial successToday we are going to talk about debt andhow to eliminate it. Dollars For many people the temptation to con-sume now and pay later is too great.& We have had the benefit of cheap creditSensefor some time now and Mark Carney, Bank ofCanada governor, has been cautioning thatBy Peter Watsonmany people have piled on too much debt,which is a threat to personal as well asencourage you to actually take the time tonational economic health.create your own year-end Statement of NetIf the interest rates start to creep up any-Worth.one carrying significant debt could be in aIs any of your debt tax deductible? Antough predicament.example would be if you have borrowed toDebt reduction makes sense from twoERIC RIEHL / OAKVILLE BEAVER invest. If that is the case, you can use theperspectives. People often want to eliminateFOR MOMS: On hand for the ribbon cutting ceremony of The Glowing Mom Pregnancy Spa andinterest costs to reduce your taxable income.debt to free up cash flow and that is under-Imaging Centre,321 Kerr St.,on Saturday were (l-r) Mayor Rob Burton,Ward 2 Councillor PamNext, consider if any of your debts can bestandable. However, they also want toDamoff,owner Biljana Vasileva,and Ivan Todorovski.The new business provides a full range of mas-shifted from non-tax deductible to a tax-increase their net worth.sage,spa and ultrasound services to new moms.deductible? Having a debt reduction strategy doesAn example would be having a mortgageboth. Yes, you will pay off what you owe. Andon your house and owning a non-registeredat the same time you will increase your netinvestment with no debt. This is backwards.worth because those debts have beenDebt should be on investments so thereduced or eliminated.interest cost is tax deductible. ConsiderThe starting point is to complete a year-switching the debt, so you can maximize itsend Statement of Net Worth. Your net worthtax deductibility advantage.is simply your assets minus your debts.There are some rules that can apply toHaving all your assets and liabilities on onethis tax saving strategy, so we recommendpage should simplify the process.getting expert advice.Begin by listing all of your assets underLook to see if you should consolidate yourthree headings of Personal, Registered andloans. The main reason would be to reduceNon-Registered.your costs on balances you carry.Personal will include your house andFor most, credit card charges will be theother significant personal assets. Registeredhighest interest rate you are charged. Somewill include things like RRSPs and Tax Freestore cards charge close to 30 per cent.Savings Accounts. And finally Non-If you can arrange a secured Line ofRegistered will include everything else.BDO CONGRATULATESCredit the interest rate would likely be in theThen list all of your debts. Beside eachITS NEWEST PARTNERthree to six per cent range. debt figure on your statement write theIt would be far better to borrow againstinterest rate that is being charged. Thisyour house at a low cost and use those fundsmight take a little digging, but it is worth theDavid Veld, CA, has more than ten years of experience providing assurance, to eliminate other higher rate debt.effort.accounting and advisory services to clients in multiple sectors. He specializes Be careful here. Rule number one is to pay off the mostin pensions and other employee benefi fit trust funds and also has signifi fi cant If you magically shift credit card debt to aexpensive debt first.experience in the manufacturing, distribution and services sectors.line of credit, you should be disciplined toAn easy example would be if you had aBDO is the sixth largest accounting and advisory partnership in Canada with pay down your line of credit and not begin tomortgage with an interest rate of five per95 offi fices nationwide. Our professionals have the expertise to serve owner-accumulate more debt on the credit cards.managed, large and mid-market companies, communities and non-profi fits in cent, a line of credit charging six per centa broad range of industries. BDO. More than you think.Controlling debt is an important compo-and a credit card which charges 20 per cent.nent of your personal financial planning.Assurance | Accounting | Taxation | Advisory ServicesPaying off as much as possible of the creditYour ability to achieve personal objectivescard is obviously the best strategy.3115 Harvester Road, Suite 400will all be affected by your debt level.Burlington ON L7N 3N8Remember that paying only minimumDirect: 905 633 4917Managing your debt well is a good start topayments will take many years to get theMain: 905 639 9500having long term financial success.card paid off. Credit card statements nowwww.bdo.ca Submitted by Peter Watson, MBA, CFP,show you how long the repayment periodR.F.P., CIM, FCSI. In 1991 Peter founded Peterwill be if you only pay the minimum. Watson Investments in Oakville. Peter can beBDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, Have a look, you may be shocked.a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.reached at 905-842-2100 or visit the website atThese simple things are easier to see ifwww.peterwatsoninvestments.com.they are written down and that is why wewww.oakvillebeaver.com OAKVILLE BEAVERThursday, January 27, 2011 24