finance

Four financial priorities for 2022

Build an emergency fund If there is one thing we have learned through the pandemic is that in life, anything can happen.An emergency cash stash helps put you out of financial harm’s way. Ideally, it should be equal to six months’ salary, to give you half a year to recover if the income on which you live dries up through job loss, accident or illness. That’s a lot of money to accumulate, so just focus on building your cash buffer slowly over time.If you have a home loan, park your emergency cash pile in a mortgage offset account, so that it saves you significant loan interest too.  Protect your family No-one likes thinking about the prospect that they will get hurt or, perish the thought, die. However, right now, ongoing income and lump sum life insurance is everything.At a basic level, you need life insurance if you have dependents, sufficient to cover your debts and perhaps raise any children to adulthood. This is often sold with total and permanent disability insurance, which pays out a lump sum if you become disabled  Pay down debt Debt is doing nothing but dragging you back. Every day you hold it, there is every chance that it could end up costing you more. Most economic forecasts are for loan interest rates to start to rise before the end of this year. The most advantageous way to attack your debt is in descending interest-rate order – so from the debt at the highest interest rate to the lowest interest rate. Get investing Your final priority for 2022 should be to grow your overall wealth. While you may earn income for, say, 40 years, it is important to realise that you might need to make this amount of money stretch more than 60 years. Thankfully, we have an excellent superannuation system ticking away for us in the background to help built a healthy retirement nest egg.

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