Every working adult should know the financial basics. Very few people are proactively conscious of their financial wellbeing. Financial health is not just about your present income, your monthly expense and if you are living from one pay cheque to another or if you are managing to put aside a few bucks. You need to have a plan to have your financial affairs in order and in control for a predictably prosperous future. While it is difficult to perfect financial planning overnight, you have to get started somewhere. Get started with the financial basics.
- Always have your accounts organized. We aren’t talking about the bank accounts you have but a professional account of all your incomes, expenses, savings and investments. From your financial liabilities to your assets, everything should be well documented. You may consider a certain expense to be too tiny to find a mention in your account and some incomes may be deemed a surplus. Ideally, you should account for everything.
- Always keep an eye on the official cash rate. It is the standard set by the Reserve Bank determining the cost of borrowing money. More precisely, the cash rate is the rate on unsecured overnight loans between banks; the Reserve Bank sets a target for it. The official cash rate is reviewed from time to time. It goes up and down and remains constant. The focus is to keep a check on inflation but the rate affects all financial products, at least within the regulated banking and finance industry.
- Your mortgage and all other secured or unsecured but conventional loans will be influenced by the official cash rate. A mortgage is an asset in the making because the money you spend, even as interest, is actually getting you a property. Credit card interests and all other secured or unsecured loans excluding business loans would also qualify as debts with no major returns. These would have an adverse impact on your financial health.
- In addition to saving money, you must consider investing your savings. Savings can earn interest. Whether to invest depends on your goals, timeframe, liquidity needs and risk tolerance; higher returns are not assured. But make investment choices wisely as those too can wipe off your savings.
As always, we recommend speaking to your YFG specialist for expert guidance and assistance.
