Written by Melissa Grimshaw
Our Financial Health, much like our physical health, is a critical aspect of our lives that requires regular check-ups. You would naturally consult a doctor to ensure that your body is functioning optimally, you should also consult your financial adviser to make sure your finances are running optimally.
A financial Health Check can also be termed as a Financial Review. Whereby at least annually you and your adviser check in and lift the lid on your overall financial position and ensure that all is well. A check-up is the cornerstone of a successful financial plan. Here is why it’s so vital:
- Evolving Financial Goals: As we navigate different life stages, our financial goals and needs change. Whether it’s buying a home, saving for a child’s education, or planning for retirement, each stage comes with its unique challenges. Regular reviews help align your financial strategies with those evolving goals.
- Market Dynamics: Financial markets are not static. They are influenced by a myriad of factors, including economic policies, global events, and technological advancements. A regular financial health check can ensure your portfolio is aligned with current market conditions and is positioned for future opportunities.
- Risk Management – Over time, your risk appetite may change due to alternations in personal circumstances or market conditions. Regular financial assessments ensure that your investments are in line with your current risk tolerances, safeguarding from potential overexposure.
- Debt Management: For many, managing debts efficiently is as primary concern. Regularly reviewing loans, credit card balances, and mortgages can provide insights into whether you are on the most cost-effective terms and if there’s room for restructuring or consolidation.
- Tax Optimisation: Tax Laws and benefits can be complex and ever evolving. By Periodically reviewing your financial situation, you can ensure that you’re leveraging all available tax advantages, potentially saving.
DID you KNOW ? From the Australian future tax system review (also known as the Henry Review 2015), identified that there are at least 125 tax types in Australia, but 90% of the revenue is collected by 10 of these taxes!
- Estate Planning: Ensuring that your loved ones are taken care of and that your assets are distribute according to your wishes is a crucial aspect of financial planning. Regular reviews can help in updating Wills, trusts, and beneficiaries to reflect any changes in your personal circumstances.
- Budget review: Check on your budget, at least annually as expenses and income change and can highlight opportunities you might have missed – i.e., giving yourself a pay rise (savings), be a tax saving strategy, or a more favourable interest rate on a loan.
- Avoid pitfalls: Regular reviews can help in identifying or rectifying financial mistakes or oversights before they snowball into larger issues.
- Building Confidence: Knowledge is empowering. By continually being aware of where you stand financially, you are in a better position to make informed decisions, giving you greater confidence in your financial future.
- Peace of Mind: Last but certainly not least, knowing that you are on track to achieve your financial goals provides a sense of security and peace of mind, which is invaluable.
FUN Fact – you can apply a simple maths equation to determine the ratio of your financial health?
Current ratio = current assets /current liabilities.
If you have a ratio that is greater than 1.0, you are doing okay. 😊
Image by vectorjuice on Freepik
Over the past months, we have talked about a lot of different financial concepts and understanding what we do, though to tie it all together, does require a regular financial health check or review. Engaging your professional financial adviser can help guide these reviews, ensuring a comprehensive assessment and strategies are tailored to your unique circumstances.