Are you financially fragile?

Mortgage Broking / Reality Check

Commonwealth Bank survey data reveals that more than a third of Aussies are spending more than they earn each month*

27% of households report having a cash buffer of less than $1,000. A further 27% report cash savings of between $1,000 and $10,000^

What will happen when you face an unexpected financial emergency?

Let me put it to you this way: If you had a car accident and the fine, insurance excess and medical bills totalled, say, $5,000 and you had to take a few weeks off work – unpaid – would you be able to cope with it?

I wouldn’t wish this upon anyone, but the reality is, some scenario like this will probably happen to you at some point in your lifetime.

Not nearly as dramatic, but this was me recently: fine for an invalid Myki, urgent car repair, car insurance renewal – all at once.  $3,000 right there.  KABOOM!

Have you got the emergency cash set aside to deal with these unexpected road bumps?

The philosophical side of me doesn’t believe we should gain our sense of security from having a pile of cash hanging around, but boy does it makes a big difference.  I’ve been broke before and it’s a horrible feeling.  There is no way I’m going back there and I’m thankful I learned that lesson early in life.

Compare how you feel when you’ve got a wallet full of crisp, fresh notes, to when it’s full of receipts.

You’ve exchanged your time for money, then exchanged that money for something else.  Was the trade worth it?  That depends if you consider your time more valuable than many of the non-essentials you might buy.

Your financial life becomes worse when you find yourself giving into your wants to the point where you reach into your wallet for the credit card. Your income cannot cope with your rate of spending.

Now you’re on a slippery slope.  More like a waterslide with heaps of detergent and a slippery mat lubricating your speedy descent to the bottom.  And boy is it a slog to get back up to where you started.

If you ever actually do.

Thing is, credit cards and spending your equity (dipping into your offset) is a form of dependency, or ‘leaning’.  It’s a bit like becoming that person who calls you and all they talk about is their problems.  You see their name on your phone.  You answer it.  You have to because they’ll call until you do.

Then they dump on you.  Their life is like an episode from Days of Our Lives or any other miserable midday US soap opera.

The worrying starts.  Fear visits more often.  You begin to find that the only way to cope is to sweep the financial dirt under the rug.

Nothing can save you.  Except you savings.

Cash gives you power, just ask Pacino, De Niro or Brando.  Forget about the guns, girls and flash cars.

Power comes from having cash on hand.

Having enough money saved to support you and your family for, say, three months is so empowering.  It gives you self-confidence. Security. Strength.

And you don’t need a heap of cash to start feeling more in control.

See how you feel when you do these two things:

  1. Put 10% of your income into a savings account (if you’re mortgage-free) or into a redraw account (they’re a little less easy to pilfer than an offset) every pay day. And don’t touch it,  unless there’s a financial fire to put out.
  2. Find strength through becoming more austere in the way you spend. Spending Awareness – as we like to call it – gives you strength.  You’d be surprised by how much more in control you can feel by denying yourself a pair of shoes, cocktails when a glass of wine will do, a race exhaust or spoiler.  You just paid yourself!

Of course, there’s only one thing in your financial life that could make this situation even sweeter and that’s getting rid of your mortgage faster.

Pay off your home sooner AND save for a rainy day, or a downright deluge?  Totally doable.

Clover Partners has the solution to paying off your mortgage ahead of time.  We’ve got the solution to your savings challenges.  We’ve got the solution to your retirement worries.

We’ll share straightforward advice with a strategy that not only makes sense, it’s realistic and achievable.  We’ll get your money working for you, not your bank. We’ll set you on a path to financial security in a way no one else can.

So what are you waiting for?

 

*CommBank owned research.

^ME Bank Household Financial Comfort Report February 2017

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