How can clients recognise valuable advice?
Scott Farmer of Bravium breaks down how clients can recognise valuable advice.
Covid has had an enormous impact on our lives, even in Australia where we have been largely successful in navigating the issue. There are the obvious changes to travel and holidays that may continue to be an issue for many months or even years to come. However, have you thought about the impact on your financial position in the future?
As part of the Government’s Coronavirus Economic Response, many Australians have taken money out of super via the “Early Release of Super” scheme. $10,000 may not seem like much, however for a 30 year old, this could reduce their superannuation by around $76,000 or more depending on returns, at age 65.
So, how do you ensure that Covid does not permanently put you on the wrong financial path?
I think the word ‘affordability’ lies at the heart of answering that question. How you and I define affordability is likely different, based on how our parents treated money, our innate impulsiveness, our ability to be disciplined, and our financial position.
For some, affordability is defined by how much money the bank will allow them to borrow. Just look around and see how many BMW’s, Audi’s and Mercedes Benz drive around town. Most of these are purchased with debt, not savings and we justify the expense by simply considering whether we can afford the monthly loan repayment. This sets us on a path of financial insecurity, as we wonder where all our money goes and why we aren’t able to save anything from our fortnightly wages.
What about if we thought about a car purchase, not in terms of a monthly loan repayment, but in terms of what we could do with that money if we invested it instead. What if you thought about the cost of a $50,000 BMW in terms of 10 years time. If we buy the car, in 10 years we will have perhaps a $10,000 motor vehicle. Or alternatively if we invested the $50,000 let’s assume we would have an investment portfolio worth $100,000. Then the question to be considered is can I afford to forego having $100,000 in 10 years time. If you own 2 cars, now it’s $200,000. That’s a lot of money.
Re-framing how you think of and define affordability in the context of your own financial position, could be one of the benefits that comes from Covid and help define your financial success long into the future.
Disclaimer: This is not personal advice. You should seek the services of a licensed financial adviser for personal financial advice.
Scott Farmer of Bravium breaks down how clients can recognise valuable advice.
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