Debt is a common feature of many people’s financial lives. And a common goal is to become debt free or hold onto as few liabilities as possible. While driving down this side of your balance sheet is often a sound move, it isn’t the only way to view debt.
The reality is that not all debt is equal. If you are thoughtful with how you address your liabilities, they can help to move your life forward rather than hold you back financially. The key factor is knowing how to strategically manage your debt.
Your securities can help provide access to funds.
Picture this scenario:
You’re driving through a neighborhood you’ve always wanted to live in. And, you happen to see the perfect house for sale. The market is hot, so you have to move quickly in order to have a chance at securing this home. Doing so also means that you’re going to sell your house, but you need to make a strong offer on the new home first.
Rather than believe that this financial move isn’t possible, you decide to take advantage of a tool available to you as an investor: a securities-backed line of credit.
Securities-based borrowing is when you tap into the value of your investments to help your liquidity — without having to sell your assets to do so. To make this strategy work, you must be a qualified investor with enough securities to use as collateral, which depends on the value of the asset you’re seeking to purchase. With this opportunity in place, you can access the funds the moment you need them.
For the scenario above, by borrowing against your securities, you could have the loan you need quickly enough to buy that dream home — before your current home sells. In fact, we helped a client go through this exact process recently, and they were able to close on a house within seven days. In a hot real estate market like we have in California, timing is everything.
The ability to streamline your buying process without having to divest funds in the process can be useful for moving your life forward. And as with any investment tool, understanding the risks involved is important when preserving your financial foundation.
Create a plan to move forward.
At Morse Wealth Management, we aim to help our clients to plan rationally and think logically. We can work with you to identify whether securities-based borrowing is an appropriate strategy for you. Should you pursue this tool, we’ll create a plan for you to pay it back. Rather than add weight to your balance sheet, we want you to foster financial freedom. So, identifying the steps you need to repay your debt is as important as taking on the debt to pursue opportunities.
Throughout your life, we’re here to help you make choices that best fit your unique needs. Whether you want to buy your dream house, fund your child’s first home, or realize another goal, we’ll work with you to build a future that inspires you.
Contact Morse Wealth Management today to start the conversation at (619) 713-5950.