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Debt, Investment And Spending Analysis

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Debt, Investment and Spending Analysis

With Tony’s GIC coming due next month with an approximate worth of $163,000, now would be a good time to conceder how best to spend this money.
Looking at your current net worth, I can see a major portion of your liabilities comes from your mortgage. Come October, this mortgage will have decreased to $137,000. Should you refinance your mortgage at the current rate of 5.5% for an additional 25 years, you’d be paying an $115,811 in interest. To compare, if you took this $137,000 and put it into a GIC, you’d receive $89,105 which is $26,706 less.
For this reason, I believe you should spend $137,000 of the GIC to pay of the house completely. This will leave you with an extra $2,500 a month when compared to your current cash flow.
Similarly, your credit card debt can also be taken care of with the funds from the GIC. As the interest on credit card debt is 30%, it’s a good idea to get this paid off as quickly as possible. Credit card debt can easily grow and get out of hand. The interest you would have to pay would be $1,365 more than you would earn if you’d put that same amount into a savings account for one year.
As CESGs also have a high interest rate of 20%, so it would be advantageous to put a full $10,000 into your children’s RESP. This would give you the maximum available CESGs for the year, giving you a return of $2,000. That’s $1,550 more than you would earn if you’d put that same amount into a savings account for one year.

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