In Ireland the Celtic Tiger brought with it unprecedented access to credit facilities, which were gladly lapped up by the Irish public. However, the legacy of poor financial planning from this era is now plain to see.

During this boom, many people found themselves owning multiple rental properties without ever examining how these portfolios should be structured to maximise efficiencies in all areas including cash-flow, tax planning, wealth creation and wealth protection. Now that the economic conditions have changed so dramatically in tandem with a tightening of cash-flow, the lack of planning is having a direct impact on how people are managing their own personal economy and possibly limiting chances to generate future wealth.

Take the example of an individual who has found themselves owning multiple rental properties, but who has never taken the time to put appropriate financial planning controls in place. Poor planning may have resulted in a situation where the individual has to use some of their own money to help cover the cost of owning these properties.

Where an individual owns investment properties, these properties should be self financing assets. This means that the money receivable (rent) should be greater than the costs associated with owning the property. If the property is not self financing and you have to contribute some of your own money to cover the costs, it becomes highly inefficient as the money that you will be using will most likely be coming from your salary on which tax has already been deducted. In such a situation you have not only tied up your wealth in an illiquid asset, but have also created a drain on your cash-flow. In most cases, it is possible to create a situation whereby you can improve your cash-flow position through restructuring the finance arrangements and also ensuring that you minimise any tax liability.

If, through appropriate tax and financial planning, the individual in question can create a situation where the rental properties are now self-financing and possibly providing a surplus income, the whole picture changes. In this situation, you have now freed up your cash-flow, which allows you to use this money to fund other areas of your personal economy and implement plans to generate future wealth.

So what should you do to help develop your personal economy now that you have freed up some of your cash-flow? The answer to this will be different for each individual. However, there are a few fundamentals that all people should look at.

Credit card debt and other short-term debt is a burden that most of us are faced with. This debt is very expensive due to the high rates of interest payable and therefore, clearing this debt should be high on your priority list.

Using the money that you have been able to free up, you can now focus your attention on paying off any short-term debt. By clearing this debt as soon as possible, you can help to free up even more cash-flow, which can in turn be used in other areas of your personal economy.

Page 1 of 2 :: First | Last :: Prev | 1 2 | Next