Bruce Brammall: Strange things happen when your debt pile turns upside down. Here’s what to do now ...

Discombobulated. Funny word. But I’m feeling it. As of last week, I’m in a position I haven’t been in for a very, very long time. Bit surreal. Might need to change the moniker for this column. Why? Well, “DebtMan” is currently “debt-free”. No debt in my personal name. Last time I could say that was January 2000, mere days after we literally partied like it was 1999. Almost more bizarrely . . . I don’t own any listed shares in my own name. (I’m excluding superannuation.) I don’t recall that being the case since 1988. My mum then made me put $518 (100 shares at $5.18, plus $30 brokerage) into CSR, Midnight Oil’s good ol’ Blue Sky Mining Company. That money had to be invested in case I crashed the family’s Mitsubishi Magna and needed to pay the insurance excess. How did I end up here? A “change in household circumstances”. Silver splitting. However, this isn’t a column about divorce. It’s about what people might have to reconsider when their debt position changes radically downwards. Obviously, not everyone whose marriage ends finds themselves debt-free. Some will be the opposite — loaded up with debt they weren’t expecting to carry to keep the house or the business. Some will now own their home outright. Others might find themselves renters again. But I’ll concentrate, today, on the debt-free peeps. Because it’s a foreign concept to me — the guy who wrote half a dozen books on debt strategies. Small bonus Well, for the first time this century, I benefit from this month’s interest rate rise. Woo-hoo! Doesn’t mean I’m cheering for further rate rises. And I was never one to cheer for rate cuts. I want the Reserve Bank to do the right thing for the economy. But if you no longer have an offset account, you need to find a place to park your cash where you’re getting a decent return from your bank. Rethinking ‘home’ Suddenly moving to a “no debt” position can fundamentally change your outlook. And it might take some time to settle with it. It’s obviously going to be a very different proposition for those who now own their home outright, to those who are settling into renting again. This might be an opportunity to reinvent “home”. Do you need to live where you currently are (proximity to kids might lock that in), or do you get a chance to move somewhere fresh? Others still will be contemplating exactly where they want to live, or whether they want to buy and get a mortgage again. Don’t rush the big decisions. Take your time. If you are exiting a marriage, there’s probably a lot else on your mind, including emotional issues regarding the kids and/or your former partner. Risk changes You might completely re-think your attitude to investment risk. If you’re intending on remaining debt-free, whether renting or now owning outright, do you have enough to get you through? Many, even those in their 50s or later, might be debt-free, but financially devastated. How’s your super? Did you lose some of your super, or gain some? How does the changed balance impact on your future retirement? Will it cover needing to rent for life? Some will naturally feel they can now become more conservative with their investments. They’re set. Might even be considering retiring earlier. Should you reassess your risk upwards? Work longer, become more aggressive, because they’ve come out of the relationship badly financially, and now need time to rebuild. Financial responsibility The removal of debt is probably just one of many massive changes to your finances. Were you financially supporting your ex, or were you being supported? That is, you might have excess income now, or the opposite — having to tighten the reins and budget. Were you the financially literate one of the couple? If you were, then things might have just become simpler for you financially (but maybe tougher in a life management sense). If you weren’t, learning how to handle money could be scary. You’ll probably have to deal with personal budgeting. But outsource other aspects you’re not confident with, such as super and investments, to a financial adviser. Board the train To be fair, I don’t expect either of my newfound strange situations to last long. I’ll re-enter investments shortly. A future mortgage is probable. But being debt-free for the first time in more than a quarter of a century, certainly feels like I’ve entered Stranger Things’ Upside Down. Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and mortgage broker. bruce@brucebrammallfinancial.com.au.