AVOIDING FINANCIAL MISTAKES or in particular avoiding those top 10 common financial mistakes can be the best financial decision people make.
Sometimes we must sound like a broken record when giving advice and talking about strategies like gearing into property or gearing into shares and how they can be a great long-term investment asset. They can be great long term but you need to be careful of debt levels and cash flow levels, making it very important to get advice from somebody who can give you independent or third-party reasoning with your best interests in mind.
We are advisers providing guidance for many clients and we act as a ‘financial sounding board’. Often on many matters to do with lending family money, business opportunities and more than often ‘that golden property opportunity.’
We ask the hard questions, we play ‘devil’s advocate’ and use common sense with no emotion to seek out the risk levels.
Recently we have been assisting a number of new clients who are in cash flow and debt difficulty. They have been accumulating property assets and rental properties over the last 5 to 6 years and have now found themselves with a cash flow headache.
A recent example of this is clients who were sadly caught up with a property spruiker/development group and were sold property off the plan and in housing estates. They were told by the salesman promises that they would double their value in 7 years, which in real terms means an 8% to 9% per annum annual property growth – which we all know is highly unrealistic.
Even though the rental returns have been satisfactory for all of the properties, the sad position is that they have property values which have only marginally increased and are now under pressure from their banks to move from interest only payments to principal and interest. This has caused them great financial stress in the last 3 to 4 months as they are having difficulty meeting the increased principal and interest repayments.
The good news is they are in a position to potentially sell a couple of their properties, so they can look forward to a comfortable cash flow position today and still be in a good position for retirement.
The hard part for them is selling property at what could be a potential loss which is never a great feeling, but the better feeling is to know that you have cash flow certainty today and retirement certainty in the future.
So we will continue to be a broken record and talk about being prudent with borrowing and for all Australians to obtain professional advice from a third party source.
