Have You Checked Your Financial Health? | October 21, 2015
Research from Bankwest has found that 1 in 3 Generation Xers fit into the ‘financially unfit’ category. You might be thinking, “Surely I’m part of the ‘fit’ category”, but according to Bankwest, only 26% of Australians are classified as financially fit. While the results show that around half of Australians have ‘borderline’ financial fitness, there is still a substantial number of people who are not in a strong position financially, with little to no savings, high housing costs compared to income, too little insurance and few assets to their name. So with all of these gloomy statistics in mind, what can be done to improve financial fitness?
Consider financial fitness to be just like physical fitness; both require patience, perseverance and the right frame of mind to achieve your specific and attainable goals.
Several weeks ago we focused on fitness at CFB, and our efforts to keep in shape, both in and out of the office. If you didn’t see the blog, catch it here! So we thought we would follow on this week with financial fitness and some helpful pointers to assess your current fitness levels, and tips to assist you going into the future.
So what is Financial Fitness?
Just like your physical health, your financial health is arguably one of the most important factors that affects your happiness, security and quality of life, and that of your family’s. While physical fitness involves training your body and building your endurance levels, financial fitness means training your money to work more efficiently and building up your financial reserves. And looking into the future where physical fitness increases your chances of living a longer, healthier life, financial fitness helps you cope with life’s financial tests and assists you in retiring comfortably.
So they have more in common than you would think!
Unfortunately, just like reaching your health and fitness goals, financial fitness doesn’t happen magically overnight; it requires hard-work and making time to think about it. Nevertheless, the benefits of preparing your finances for the future far outweigh the time costs when you think about the importance of protecting your family and giving yourself some extra time. So no more excuses, help shape your future!
What does it mean to be financially fit?
As a starting note, as with physical fitness, financial fitness is more about being on the right path and having specific and attainable objectives to motivate you along the way. Without a clear direction and checkpoints to measure your successes against, we may struggle to stay on course. With this in mind, the first step to becoming financially fit is to define your goals, have a financial plan and work towards the same. However, sometimes setting the plan can be a difficult task, and as with consulting a nutritionist or a personal trainer for fitness, consulting a financial professional can give you unbiased advice to guide you better.
Financial fitness starts by asking yourself some key questions and giving honest answers. Just as no one likes to admit they need to shift a few kilos, admitting your financial weaknesses is an uncomfortable task. With the hardest step being recognising you have a problem, here are a couple of questions to help you understand how your financial strategies compare.
- Are you living paycheck-to-paycheck? And are the days right before payday a stretch?
- Is your insurance cover in line with your personal debts and income?
- Are unexpected expenses paid by a credit card or a family loan?
- How is your credit card balance? Is it manageable?
- Do your dreams of holiday, new car or private school tuition seem a fantasy?
- Have you made serious steps towards retirement planning, or is it a case of “I’ll sort it out sometime in the future?”
If you said yes to, or perhaps faltered on, any of these questions, it’s a pretty good sign that you could be in better financial shape. But it’s never too late to start, and with a problem identified, you can craft a strategy to whip yourself into shape.
With all this being said, below are five general strategies to help increase financial fitness:
- Talk About It
- If you have a partner, communicate with them on a regular basis about your household finances.
- Work Out What You’ll Need
- Calculate with as much accuracy, how much money you think you will need to live comfortable in retirement.
- Forecast What You’ll Have
- As with strategy 2, forecast to the best of your ability how much money you think you will have at the time you retire if you continue to invest and save at the rate you are now.
- Maximise Saving and Earning Interest
- However small it may be, any contribution from each paycheck is a contribution to your future
- Minimize Debt and Paying Interest
- You could strive to always pay household and credit card bills on time and in full each month, or even build an emergency fund.
Why is Getting Financially Fit More Important than Ever?
Because we are living longer than ever! The Australian Government’s Intergenerational Report 2015 highlighted that Australian men live on average, for 80.1 years, and Australian women for 84.3 years. Although this is a huge positive, it does mean we need to plan to have more funds in retirement, and action is needed now to ensure your current and future financial fitness.
If you would like to read more articles like this one, then check out the rest of our blog where we post a new article every Wednesday.
Every effort has been made to ensure that the information provided is accurate, however, the information in this article is general in nature. Your personal circumstances were not taken into account when preparing this information and before making any decisions, we recommend you consult a financial planner to take into account your particular investment objectives, financial situation and individual needs.
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