Now We Have Cheap Money

BorrowBut Should We Use It?

We’ve now got cheap money so let’s borrow more so we can spend more and save our country.

Well that’s the message from the Reserve Bank. It’s a message I support but with one big fat caveat: It’s a message for business owners not households.

If you’re a business owner only borrow to buy assets, technology or IP that will drive your revenue upwards, increase your profit, and make your business worth more.

Don’t borrow to buy luxuries, a new car or anything that will not add value to your business.

Here’s a simple test:

  • Is the interest tax deductible?
  • Is the asset tax depreciable?

If not then do not borrow to buy anything outside of this asset type.

And don’t forget the ugly side of borrowing: No matter how low the interest rate you still have to pay back the borrowed money. Don’t borrow to increase your personal or household debt.

If you’d like a bit of ‘arms length’ advise about borrowing, contact me, Jamie Tulloch, I’d love to help you out!