THE GOOD AND BAD OF DEBT

Dear Client

Welcome to our May 2024 edition of FC Viewpoint.

With several big headlines still expected during the next few months – including our own elections, expect the noise to continue in markets. Good financial advice and the ability to not only stay invested but seize new opportunities that emerge in this volatile world can make all the difference.

IN THE NEWS:

  • The JSE All Share Index is on 78 650 as of Monday 13 May 2024. This is a welcome 4.6% increase for the last month.
  • 1 US Dollar will cost you R18.38; 1 Pound = R23.04 and 1 Euro = R19.83.
  • Annual consumer inflation (CPI) is at 3% .
  • The prime lending rate in SA is 75% per annum.
  • The price of Oil is $83 per barrel.
  • 70 – Political parties contending for the seventh SA democratic elections since the first one took place 30 years ago.

THIS MONTH’S TOPIC: THE GOOD AND BAD OF DEBT

Highlights of the main elements of good debt vs bad debt.

Contrary to popular belief, there is both good and bad debt. Most individuals are in debt at some point in their lives. We all dislike paying interest payments, but saving enough money for large expenditures, such as a house or a college degree, is not always feasible and in certain circumstances, it is not financially wise. Here are some key differences:

Good Debt: Good debt involves purchasing a home or other asset that will appreciate in value or help you earn more money. Other types of good debt include investing and beginning your own business, with the long-term objective of generating wealth and profit.

Bad Debt: Bad debt accumulates from purchases that do not contribute to wealth creation or give long-term value. Bad debt depletes your wealth. These debts frequently lack realistic repayment arrangements and would not pay for themselves in the long run (as a business or investment would).

You safeguard your future-self by being aware of the nature and purpose of any debt you incur. The correct amount of good debt may improve your capacity to save for the future, develop wealth, and finance the things you want in life while avoiding bad debt.

TO CONCLUDE

“The stock market is a device for transferring money from the impatient to the patient.” Warren Buffett

We like to invite you, to make us part of your financial journey, in good and in challenging times and every life changing event in between. Feel free to call us, or to book a physical or online meeting, we are here for you.

Wealth regards,

Fanie Jansen Van Vuuren CA (SA), CFP®

Director: FC Wealth and Investments (Pty) Ltd

E: [email protected]  |  T: 083 384 5868

W: www.fcfin.co.za

Download this issue of Viewpoint here