Are you on the brink of financial disaster?
As part of my job as a Financial Adviser, I get up close and personal to a client’s finances. I get to see the inner workings of how people earn, spend and invest their money, and then make recommendations based on what their goals are and what they are ultimately trying to achieve out of life.
There is no such thing as the ‘perfect’ financial structure because everyone has different goals, preferences and ideas of what is important in life. The best part of my job is assessing a situation and recommending the best way to move forward, and the outcome is different every time. The overall strategy is my favourite part of financial planning. It probably comes from my love of organising things.
How can that be?
Earning a high income isn’t a guaranteed way to have your finances in order, in fact sometimes I find that it gives people over inflated financial confidence.
A high income is great, and can help you to get ahead quicker than the average, but if you are wildly spending everything you earn, you may be worse off than the person earning half of your wage.
A couple of tips
Just because you have a few investment properties doesn’t mean you are in a good position. I’m obviously all for investing, but if your investments are making a loss (ie, negative gearing), then you need to top up the payments each month. This reduces your cash flow, but may give you a higher tax return each year. That’s all well and good, but if you are sitting on $1mil worth of debt for these investments and you don’t have any income protection insurance or an emergency fund, what happens if you lose your job? What happens if you can’t work? You still need to top up the payments on the loans. Are you happy to sell your investment properties in a fire sale to make ends meet?
You have too many credit cards. Just because you can get several credit cards doesn’t mean you should, especially if you have maxed them out and are only making the minimum payments on each. As above, if something were to happen to your cash flow, how do you intend to meet the minimum repayments?
Remember to look before you leap. Often high income earners don’t check their finances before making major purchasing decisions. It comes from the confidence that they have based on their high income. Every major purchase will affect your financial position. Constantly spending without checking the figures will come back and bite you right on the behind.
I recently read an article that on average Australians are 109 days away from financial ruin. That’s just over 3 months before things could start to get dire. Do you have a back-up plan in place? Have you assessed your overall financial health in a while? Maybe with the New Year around the corner it’s time to set a few New Year’s resolutions and get things sorted out.
The post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.