The money mistakes that are stalling your savings
Updated: Dec 15, 2019
This topic needs no introduction. If you are sick of always feeling like you’re ‘saving’ or going without but have nothing to show for it, it’s likely you are making one of these mistakes.
1. Borrowing (or lending) money to friends
To quote Shakespeare, ‘Neither a borrower or a lender be’. He knew lending or borrowing money to a friend never ended well in 1599 when he wrote Hamlet. It is amazing how some things stand the test of time.
Or another old saying, ‘No good deed goes unpunished’.
You get the gist. If you want to ruin a friendship or a relationship, then go for it - loaning or borrowing money will work really well.
Otherwise, give the money as a gift. If you can’t afford to give it as a gift then don’t give it, especially if you value your friendship or relationship.
2. Having no plan
People place more emphasis on planning where they’ll have coffee with their friends than planning how they’ll manage their wealth. It shouldn’t be this way!
Planning underpins everything. You don’t have to have the most detailed and comprehensive financial plan, but you need to have something. (If you need a hand getting started, check out my tips on how to write a foolproof financial plan here.)
3. Using credit cards all the time
When you are shopping with a credit card, it can almost feel like you’re spending ‘free money’.
I’m not sure about you, but I’ve become so lazy that I don’t even enter my pin. Why? Because when I don’t have to do anything other than tap a card, the money really does feel free.
Credit cards are probably the greatest consumer-boosting tool ever invented. The problem is, you don’t need to be encouraged to spend excessively.
When the credit card bill arrives, that free money very quickly becomes real money - with interest. Do yourself a favour and as soon as you catch yourself thinking of a credit card as free money, stop, and carefully think about why you are about to make a purchase.
My advice - use cash whenever you can. Try having a ‘cash-only’ week where you only use cash. It is a great way to figure out where you spend money and what you enjoy spending money on. Once you understand why you spend money, it’s easier to reduce your expenses and set a budget you can stick to.
4. Going without life insurance
This is a huge factor for families. I mean, if you are a single guy or girl with no attachments and millions in the bank, then that has different implications. But if you are a family man or woman, you absolutely need insurance. Find out why here.
At the very least you need life insurance and permanent disability insurance to cover your mortgage and loss of income. Income protection insurance is also worth considering. Australia has some of the best priced insurance and most beneficial payouts in the world. If you’re not sure what insurance you need, have a chat to your financial advisor and they will put you on the right path.
5. Not managing your career
Your regular paycheck is your single largest earner. Don’t take it for granted.
I could do an entire segment on career management! But to get started, here a few of the most common career mistakes I see:
Not negotiating your salary. This seems to happen all the time! Your salary is negotiable, ladies and gentlemen. Push for more.
Not networking after you land a new job. When you are working with senior staff and managers, treat every task and project you are involved in as though it is part of an interview for your next role. You never know what opportunities are around the corner.
Not being open to learning new skills. Don’t rest on your laurels. Find out what skills you need to take the next step in your career and learn them. Not understanding your role. Get clear on what your boss expects from you. Work together to negotiate your goals or key performance indicators and set your priorities to ensure you meet those goals. Looking for professional development? Include goals that give you the opportunity to learn new skills and boost your career prospects. It’s a win-win. Not keeping your your options open. The best way to negotiate in any role is to know you can walk away at any point. In my career I always had a plan B and plan C. Always. Do you? Burning Bridges. This is too easy to do. Keep good relationships with people. You will become known for it and it will work in your favour when you least expect it.
6. Buying a home that is too big, on a mortgage that is too big to manage
Mortgages are the best example of good debt vs bad debt. Regardless of where you stand, or how you feel about having a mortgage, remember: a large home tends to fill up with lots of things and those things most definitely depreciate.
Having a house that is too large is a burden, and it rarely makes you happy.
7. Neglecting your super, or thinking you won’t ever get it anyway
Superannuation is your money. Trust me, you are going to want it when you retire.
If you start managing your super from an early age you will see the return on investment sooner rather than later. Why? Because the earlier you start investing, the more time you give your money (and investments) to grow. As they grow they will gain momentum and you will start to build significant wealth.
In some cases, if you start investing early enough you may be in a position to know that you have enough money to retire by the time you are 40. (I did!)
And the great thing is, once you know that you’re safely covered for your retirement, you can relax and spend a bit more of your regular income on yourself. In other words, you can treat yourself early, or retire early if that suits you.