Debt Analysis

The Ballast Atheneum is a collection of our thoughts on the twelve most important topics in financial planning. Today, the focus is on DEBT.


Debt. It’s a subject that not many people really enjoy talking about, but it’s a reality for nearly all of us. Whether it’s “good” debt in the form of a primary home mortgage or a small business loan, or “bad” debt in the form of revolving credit card charges, it’s something that we must face head-on. The following articles discuss different kinds of debt and strategies for using it to your advantage and paying it off.


When is debt OK and when is it not?

An amount of money borrowed by one party from another – the basic definition of debt sounds neither good nor bad and leaves many wondering – how do I determine if taking on debt is worth the risk?  Although the answer is not always crystal clear, most debts can be defined as either positive or negative for your overall financial situation.

Good vs. Bad Debt.


Where should debt payoff reside in your ranking of household priorities?

There’s simply no way to pay down debt if you are living beyond your means by spending more than you bring in as income.  This has to be step one in prioritizing debt payoff: dollars in > dollars out.

Once you have your budget balanced, we can address how to best exercise off that excess debt.  Where should debt payoff reside in your ranking of household priorities?

Prioritizing Debt Payoff.


How does an early mortgage payoff fit in your plan?

Although we spend a large majority of our time planning our clients’ investment portfolios, we believe advising on the entire client balance sheet is just as important.  On the liability side of the balance sheet, a client’s primary mortgage is often a major talking point. For a handful of our clients who have substantial retirement cash flow and also believe in the leverage a mortgage provides (borrow cheap, invest to make more), we have supported the idea of carrying a mortgage into retirement.  For the large remainder of our clients, we believe having a paid off home at retirement (or earlier) creates value and opportunity in a number of other areas.

Early Mortgage Payoff.


Home Equity Loan vs. Home Equity Line of Credit?

For many households in America, the equity built in their home is one of their largest assets on their balance sheets.  Historically, this asset has provided growth in value, as well as an opportunity to obtain a secured loan from a bank for short-term or long-term needs.  When a homeowner borrows money secured by their home, the homeowner can establish one of two types of loans: a Home Equity Loan or a Home Equity Line of Credit (HELOC).

Second Mortgage Planning Strategies.


What are the benefits of being debt-free?

Many “experts” argue that any debt is a shackle, making no distinction between good debt and bad debt, meaning you cannot truly be debt-free until you owe nothing.  Others, like Dave Ramsey, do make a distinction between good (debt on an appreciating asset) vs. bad debt, and define a debt-free life as one without consumer debt. We believe both sides make a valid argument; however, everyone’s financial situation is unique and being debt-free can mean something different to everyone.  The bottom line is that eliminating potentially harmful consumer debts such as car payments and high interest credit card payments can be a gigantic step toward achieving financial freedom. Here are a few of the many potential benefits of living without debt.

The Flexibility of Being Debt-Free.


What are debt strategies for students and graduates?

We’re seeing a steady increase of borrowers with six figure debt levels, making student debt repayment the most important part of those households’ financial plans.  What follows is a primer on the options for a student graduating with debt.

Student Debt Options for Graduates. 




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