As we grow up we find ourselves having to make more and more complicated life decisions. Decisions like how we navigate relationships, foster our careers and comprehend parenthood are decisions that define our adult lives and those who depend on us. With no authority to divulge relationship wisdom; having actively avoided large company bureaucracy and not being a parent myself, I'll be sticking to the often avoided adult questions associated specifically with our financial coming of age.
When should we start thinking like adults (financially)?
A tell-tale sign that you are growing out of your financial adolescence is upon the purchase of your first home or the commencement of parenthood. As an aside, the onset of financial puberty generally occurs amongst religious and country folk a little sooner than their agnostic city dwelling counterparts. However, further explanation as to what divine intervention causes this, is a topic for another conversation. Before we purchase our first home or clone ourselves, life before adulthood is really just a practice run (albeit practising is/was a lot of fun).
Once you buy a home or adopt/create a smaller version of yourself, a great deal more rides on the outcome of your day to day decisions. You have 'grown up' obligations and, even if you insist on not acting like a grown up, you'll have some adult decisions to make. As a 'financial adult' you need to consider;
What happens if I lose my ability to earn income?:
- How would I meet mortgage repayment obligations;
- Would this affect my partners ability to earn an income if they had to care for me; and
- What if this occurred for an extended period of time, how would I, and more importantly my family or partner, manage;
How should I structure my debt?:
- Do I need an offset account - how does this actually work;
- If I have other financial exposures, can I arrange my financing (debt obligations) more tax effectively;
Is cash flow management really more than just chopping up credit cards?:
- Do I have a budget;
- Can I stick to it;
- Can my budgeting be done more effectively;
What's the most effective way to utilise capital lying around?;
How would my family cope financially without me?
These questions are often the last thing you want to think about, but ignoring their implications can result in some extraordinarily more difficult questions arising in the future.
Taking the time to consider and manage your 'adult' obligations will give you peace of mind and confidence to focus on more important and rewarding aspects of adult life.
Addressing these financial questions sometimes requires the application and actioning of some common sense, whilst other times it will require some outside help to implement strategies that can best utilise your circumstances. Whether you run things by an experienced and financially savvy family/friend or seek professional advice, you can be sure that the consequences of ignoring adult responsibilities will, in the future, far outweigh any perceived hassle of taking responsibility for your circumstances.
And besides, if it doesn't make sense yet, it will when you grow up.