GFC-proof your life
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Date Posted:
April-20-2010 11:37
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Lose a bundle in the GFC? You wouldn’t have if you’d listened to market analyst Andrew Page.
While most experts agree that Australia has weathered the global financial crisis better than most, plenty of Aussies did it tough and still are today. But outside of losing a job, any pain was most likely self-inflicted.
Every day we make choices that affect our general level of wealth and susceptibility to economic hardship, it’s just that some of us make better choices than others. The secrets of making the most of your financial lot in life are outlined here; don’t be too surprised if they sound obvious.
Spend less than you earn
Unbelievably, it seems that most Australians fail to understand this most basic of truths. In the mid-1980s, average household debt was about 44 per cent of disposable income. Around 20 years later it’s above 160 per cent and rising.
Save your money
As well as spending less than you earn, allow what you save to build up. How much you save will be the single biggest factor in determining your long-term wealth. Simple, sure, but it’s amazing how few people put this into practice. A good rule of thumb, where possible, is to save at least 10 per cent of your income.
Invest
Unless you want your savings to be eaten away through the effects of inflation, you better plan on investing it. There are countless ways to invest your money, but be aware that high returns require you to take high risks. It is a good idea
to understand the risk involved with any investment and consider the worst-case scenario.
Borrow wisely
Most of us will need to borrow money to buy a house and sensibly using borrowed money can enhance your investment returns. What matters is the level of debt and what you do with that money.
Large debts take longer to pay back, so they end up costing you a lot more in interest. Furthermore, the more debt you have, the lower your disposable income. Eventually you get to the point where your debt cripples you completely and you’ll find it almost impossible to get back ahead.
Forget get-rich-quick schemes and insure yourself...