Thursday, 12 October 2006

Tracking my debts on the "No Credit Needed Network"

NCN is an interesting blog that gathers and reports the progress of various bloggers that are attempting to pay down their debts. Most of the participants have student loans and/or credit card balances that wish to eliminate as quickly as possible, but there are also a few reporting on home loan and business loan balances. I thought I may as well track the total quantum of debt I am carrying using this site to keep track of how much I ower and my progress paying off my home loans.

While I have no student loan balance* and pay off my "day-to-day expenses" credit card charges in full each month. I have some other credit card accounts which I recently opened and have taken out 0% balance transfers to invest in an online account and earn some interest on OPM^ [see previous posts link, link, link, and link] . I also have home loans for my house and an investment property which I aim to pay off in 10-15 years. My other main debt is margin loans from several lenders for my Australian and US stock investments, some mutual funds, index funds and hedge fund investments. These are generally "interest only" loans - indeed I generally capitalise a "pre-payment" of 12 months interest at the end of each tax year (to bring forward the tax deduction on the interest) and then pay off the capitalised interest over the following 12 months. I also expect to increase my margin loan balances over time as my stock portfolios appreciate - my aim is to keep the loan-to-value (LVR) ratio of my margin loans at around 50%-60%. As the stocks and funds in my margin loan accounts typically have a margin value of around 70%, this keeps my margin utilisation around 70%-85%. The margin lenders allow you to reach 105% margin utilisation before a margin call will result (when you have to reduce your margin utilisation back below 100%). This allows for an overall drop in the value of my portfolio of around 18% without getting a margin call.

I'll be sending updated figures to NCN each month and posting a link to the updated graph each month.

Debt info: (Sept)
|- $200,598.09 Investment Property a/c#1
|- $348,235.52 --- $258,020.14 Investment Property a/c#2
| (x 0.5) |- $237,852.82 Home Loan
-- $669,719.09 --- $321,483.57 --- $ 36,850.28 SGPL
| "good" debt margin loans |- $ 19,325.00 SGML
| |- $ 94,108.28 Comsec
| |- $155,592.50 LE
| |- $ 15,607.51 Citibank
$673,251.71 --- $3,531.62 ----- $ 15,532.62 -- +$ 2,332.38 Cr NAB
TOTAL CCARDS | |- $ 12,000.00 Virgin
| |- $ 5,865.00 Coles
|- +$ 12,000.00
invested Cr

* In Australia we pay only a portion of the total cost of our studies, known as HECS (higher education contribution scheme). It can be accumulated as a debt to the tax office, and gets automatically paid off via a tax surcharge once your income reaches a threshold level. Alternatively you can pay the HECS "up front" and get a 15% discount on the amount you have to pay. I've always paid my HECS "up front" so I have no debt from my studies.

^ Other peoples money - I love credit card companies lending my their money at 0% for 6 months.

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