Take the test to find out the true state of your financial health. You may be pleasantly surprised – and if not, just two simple fixes can change that.
Just like a doctor would perform a health check by looking at some vital signs, you can perform your own wealth check using a few key measures.
And even if the prognosis looks initially bad, you can remedy the situation with two simple lifestyle changes.
But before we get into the salves, let’s identify the source of any sickness. This three-step health-of-wealth test will tell you whether your finances are strong or sick.
Which brings me back to my first prescription for good wealth.
1. PAY DOWN YOUR DEBT TO GET AHEAD.
Do this, and not only your financial position get stronger each day but your requirement for income will also, eventually, fall dramatically.
Besides, for any investment to work out better than simply paying off a mortgage, a higher-rate taxpayer would need nearly 10 per cent annual return. And you don’t do that without taking on a fair amount of risk.
But what about a bit of “smart” investment debt? There can be valid arguments for a little “geared” investment. For higher-rate taxpayers in particular, it can be tax-effective and a good way to make the most of your money. Never forget – borrowing magnifies both gains and losses.
Irrespective of tax benefits, you should only ever invest in something that you believe is sound and will ultimately increase your overall financial health.
There’s no question about personal debt: you need to ditch it fast, so you own outright growth assets and can redirect all the money spent servicing debts to securing your future wellbeing.
But how can you manage this? The saying is, “don’t be writing cheques your body can’t cash,” and neither should you be writing cheques your bank balance can’t cash.
The second and most powerful prescription for financial health and wellbeing is even simpler:
2. LIVE WITHIN YOUR MEANS.
This should ensure that you live the life you want, how you want to live it, for as long as you live.
NICOLE PEDERSEN – McKINNON
THE REALLY SIMPLE GUIDE TO MONEY
The information provided in this page is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. You should seek independent advice from your financial adviser before making any decisions.
AUSTRALIAN MORTGAGE AND FINANCIAL ADVISERS (AMAFA)
Phone: 07 3378 2056
Fax: 07 3378 2069