Debt-Avoidance our Highest Financial Priority

May 24th, 2010

Australians rank debt-avoidance as the most important strategy for achieving their financial goals while investments and financial protection were the least important, according to a survey by lifebroker.

According to the Lifebroker Life Insurance Report 2010, the percentage of respondents who ranked different financial strategies as ‘extremely/very important’ for achieving their financial goals were:

• 83%    Avoiding debt and paying off debts as quickly as possible
• 78%    Protecting my assets with car, home or contents insurance
• 76%    Budgeting and saving money
• 69%    Putting money aside for emergencies
• 54%    Continuing to increase the amount I earn
• 46%    Protecting myself with life or income protection insurance
• 31%    Investing in things like shares and property

Lifebroker said the rankings indicated Australians are focused on short-term financial strategies that in the longer-term won’t necessarily provide the best financial outcomes.

“Avoiding debt, paying off debt as quickly as possible, and protecting physical assets like cars and homes are all important short-term financial strategies; however, they should be accompanied by other longer-term strategies such as building wealth through investing and protecting savings and investments by having life insurance and income protection insurance.”

“Without investments in property or shares or a business, most Australians won’t save enough for retirement or enough to realise many of their financial goals."

Not having personal financial protection like income insurance or life insurance puts an entire financial plan at risk, and the risks are much higher than many people realise:

• 25 % of male and 15% of female deaths in 2005 were of persons aged less than 65.
• 77% of Australians have had a long-term medical condition that lasts six months or more.
• More than 1 million Australians need assistance with the core life activities due to disability.

Australians need to understand that sound financial plans rest on three fundamental principles – long-term savings, investing, and protecting savings and investments into the future using financial protection.