Review Personal Finances

Signs are starting to emerge that the Global economy is on the verge of a recovery. In Australia, the stock market has recorded stock gains since the lows of March 2009, the housing market has bounced back, unemployment is increasing at a decreasing rate and it looks like interest rates are going to rise by the end of this calendar year, if not sooner.

I tend to agree with most commentators who are urging caution and state that the recovery will be an extended recovery and that there may still be some aftershocks from the Global Financial Crisis.

Whatever the case may be, I believe now is a great time to be reviewing your personal financial position. Take stock of your personal net worth (total personal assets - total personal liabilities), review your current investment portfolio, start to seriously consider your position of interest rates and recast your personal budget for the next 12 months.

Personal Net Worth: take account of all your assets (property, shares, cash etc) and deduct your liabilities (mortgage, investment loans, personal loans etc) and this is your personal net worth. This has probably changed over the last 12 months with changes in value of shares, changes in property prices, your ability to reduce your debts. Getting a true picture of your personal net worth will be important when determining your next steps from an investment point of view.

Current Investment Portfolio: is your portfolio still working for you? Do you have shares that are still in a loss position due to the GFC? Is it time to consider reinvesting the share market to average down the price of your shares?

Is it a good time to consider initial or further investment in property? Have your current investment properties increased in value to allow you to further leverage these assets?

Some commentators believe we are the beginning of the property cycle and if you invest wisely, significant wealth building can occur over the next 7 - 10 years.

Interest rates: there is no doubt about it, the historially low interest rates we've seen of late will not last for long. Add to that, the big four banks will most probably start to increase their margins once the economy shows consistent signs of growth. What would happen if interest rates increased by 2% of the next 12 - 24 months? Could you personal finances handle this? Have you considered the option of a fixed interest rate?

Recast Personal Budget: now is a great time to recast your personal budget. Circumstances are changing and we all need to be mindful of these changes and they need to be reflected in our budgeting.

Major reviews of your personal finances should be performed annually, if not every six months to ensure you are maximising the return on your investments.

Good luck