A stress test is not a new concept. People have been going to doctors for hundreds of years to see what can be done about their stress levels. What is a relatively new concept however is the stress test, which the authorities use to check up on the health of our banks. Both in Europe and here in Australia banks have had to test their businesses and subsidiaries to see how they would stand up to another Global Financial Crisis.
Fortunately in Australia most of them passed with flying colours. These tests were great as it meant that the banks had to assume falls in property prices, increased bad debts and big cash withdrawals if people decided to put their money under the bed. They were scenarios that will hopefully never happen, but the positive is it demonstrated they were in good shape and where they needed to improve.
Credit where credit is due…
This is a clear example of the banks not simply sticking their heads in the sand which we all know does happen from time to time. So if this works for them why not apply this to our own financial situation. That’s right, your very own money stress test!
All the good things in life are simple so let’s try to keep this idea straightforward. Let’s first look at the short-term problems that could arise and this unfortunately is the time to think on the scary side of things! The two most common situations that cause money stress for working families are:
There are a number of ways to stress test your financial stability but of course the most important thing to remember is don’t just sit on your hands and think everything will be OK. ‘Expect the best and plan for the worst’ definitely rings true in all money issues!
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