Using extra cash flow to reduce debt levels

This week the Reserve Bank has hinted at a possible rate cut in the near future, and with oil prices falling heavily over the past few weeks, it appears as though the table may be turning for consumers. While it is still too early to determine whether the worst is over, any reduction in the cost of living has to be beneficial for the economy and the share market.

That said it is important to understand that high levels of borrowing has fuelled the subprime mortgage meltdown and over the past two decades Australians have taken on increasingly high levels of debt to the point that we are now in a negative savings pattern. Given this, it is possible that we as a country may have our own mortgage meltdown not unlike what occurred in the US sometime in the future. I would highly recommend consumers use extra cash flow to reduce debt levels in the coming years and be more conservative in the future when using leverage.

This report is from Dale Gillham , chief analyst of share investment company Wealth Within

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