Three money mistakes to avoid

Three money mistakes to avoid

When it comes to money, mistakes hurt. Whether it’s losing a whole chunk of hard earned cash on a bad investment, or little daily money mishaps, it all adds ups.

The good news is that the first step to preventing these money mistakes is identifying what they are. Once you do that you can look at your own behaviour and make sure you’re not misplacing any of your hard earned cash.

We asked two personal finance gurus what they thought the most common money mistakes were.

The leaky pocket

“Many people let their money leak away so that it’s not put to good use and they don’t know where it goes,” says Marie Mortimer, Managing Director at loans.com.au.

Mortimer suggests taking a closer look at your daily spending to see oppourtunities for saving. 

“Each day, if you spend $4 every morning on coffee, $15 on parking, $8 for lunch, and $3 on an afternoon snack, that’s $30 a day, which is $150 a week, or a whopping $600 a month. Let’s call that $1800 a quarter.

“In that time you might also get your hair cut and coloured twice, which could stretch to $200 each, and pay gym fees of about $200. We’re up to $2,400 a quarter, or $9,600 a year.

“If your partner does roughly the same, it adds up to $19,200. All of this is discretionary spending which could save you almost $20,000 a year,” says Mortimer.

The solution 

Being conscious of your spending is the first step to plugging your leaky pocket.

Sally Tindall, money editor at RateCity.com.au, recommends using a budgeting app to track expenses and encourage less discretionary spending.

“People often don’t want to face the truth of how much money they are wasting on a weekly basis,” says Tindall, “but owning up to your money mistakes and having the evidence in front of you is the best wake up call.”

Apps from ASIC’s Money Smart and MoneyBrilliant are two good options if you want to keep a handle on exactly what’s incoming and outgoing.

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More money going out than going in

Michael Yardney, Director at Metropole Property Strategists says that ignoring the basic money rule “you have to spend less than you earn” gets a lot of Aussies in trouble.

“Some people don’t understand the importance of that but if you don’t spend less than you earn you will always owe people money,” says Yardney.

True enough, Australians love to live outside their means as one glance at the amount of credit card debt there is nationwide will reveal. Instead it seems that putting things on plastic and being over extended is a common money trend.

The solution

“If you have a problem with spending more than you earn you need to remove the temptation,” says Tindall.

“Credit cards are all too easy to get your hands on and use but can bring on a lot of debt that can be difficult to get out of.”

For those in a bad debt cycle Tindall recommends cutting up your card and starting again.

“If you’ve gotten yourself in to a credit card debt situation then you can consider cutting up the card and transferring your debt to a personal loan.”

Not jumping on the investment bandwagon

Another common money mistake, according to Yardney, is that people don’t invest their disposable income while they’re young and have some.

“People don’t understand the power of compounding interest and time,” says Yardeny.

“If you invest early and invest enough before you stop being able to invest, because you have children or your lifestyle is different or your expenses are different, those investments down the track make a big difference because of time and compounding.”

The solution

“Don’t let anyone tell you it’s too late,” says Tindall. “While investing from a young age is ideal, right now is always a good time to start putting some money away.”

“Even if you can’t make some of the riskier investments that you would have made in your youth there is no reason to not contribute to your super and savings, no matter how old you are.”

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Learn more about bank accounts

Can the government take your money from your bank account?

There are some instances when the government can take money from your bank account. This generally occurs in situations where you have an outstanding government debt.

Before it can take money from your bank account, the government authority owed money would first need to issue a garnishee notice. 

A garnishee notice is issued by the government agency (such as Centrelink or the ATO) to a third party that holds money for you or owes you money.

To take money from your bank account, your bank would be issued with the garnishee notice requiring it to pay ‘your money’ to the requesting agency to satisfy the debt.

Can debt collectors take money out of your bank account?

Many people find themselves struggling to cope with debt at one time or another. In these cases, a debt collector could contact you to demand payment for a debt, to explain the consequences of you failing to pay a debt, or to organise alternative payment arrangements.

If you’re contacted by a debt collector, you may be wondering what their rights are and whether they can take money out of your bank account.

Creditors cannot access money in your bank account unless a court order (also known as a ‘garnishee order’) is made to allow creditors to recover debt by taking money from your bank account or salary.

If this happens, the creditor can take money out of your bank account unless you pay the debt in full or make an alternative payment arrangement such as paying in instalments through the court.

How can I wire money to a bank account?

You can wire money to an Australian bank account either through your own bank or by using a money transfer company such as Western Union or MoneyGram. Either way, you’ll need the other person’s name, BSB number and account number. If you use a money transfer company, you might also need to provide the recipient’s address for large payments.

How do you transfer money from PayPal to a bank account?

Transferring money from PayPal to an Australian bank account is simple. Just follow these three steps:

  • Go to your Wallet
  • Click ‘Transfer Money’
  • Follow the instructions

The money will take three to seven business days to reach your bank account.

Once you’ve made the transfer request, it can’t be withdrawn.

Can you deposit money into somebody else's bank account?

One of the easiest banking tasks in the world is depositing money. You can even deposit money into someone else’s bank account if you wish.

The basic information you need to deposit money into a third-party bank account is:

  • Payee’s name
  • Bank, building society or credit union (though this isn’t necessary)
  • BSB (or bank code, which is the branch identifier)
  • Account number

Including the name of the financial institution isn’t necessary – particularly with online banking – because the BSB will identify this for you.

A handy tip is to record yourself (or add a personal message) in the transaction description or reference. This will show up on the recipients account, letting them know who’s paid them the money.

How to transfer money to another bank account

Transferring money to another bank is often called a bank transfer, and it can be done a few different ways.

Customers generally need three pieces of information to transfer money to another bank account. Customers need the account name, BSB and account number of the account they wish to transfer money to.

One way of transferring money to another bank account is in a branch with the help of a staff member; they will often give you a receipt as well as confirmation of the transfer.

Transfers can be also made via internet banking and phone banking.

Some banks also allow customers to make transfers via partnered ATMs, especially if the account is with the same bank.

How do I transfer money from Paypal to my bank account?

Transferring cash from Paypal into your bank account is simple…if you have a Paypal account that is.

Once you’re logged into your Paypal account, the account balance will appear on your home page. Below your balance are two options:

  • Add money
  • Withdraw money

Choose option two if you want to transfer money from your Paypal account to your personal bank account.

The next screen will prompt you to either enter new bank account details or choose a bank account that’s connected to Paypal. You can always add more bank accounts to your Paypal profile.

Another way to transfer out of Paypal is by jumping to the wallet tab on the top menu, and clicking ‘transfer money’. Both options will give you the same result.

How do you set up a bank account online?

Once you’ve compared bank accounts and found the right one, the process of opening a bank account online is quite simple and can be done in around 10 minutes.

To set up a bank account online, you’ll need to prove your identity and provide an approved form of ID as well as your tax file number (TFN).

If you’re a new customer of the bank, you’ll need to verify your identity and potentially upload documents before you can complete your online application.

Once your ID has been verified and you’ve set up your bank account online, you should receive your bank cards in the mail along with your PIN and any other account details.

Do I need to open a business bank account?

Just because you’re in business doesn’t necessarily mean you need a business bank account. You could be a sole trader not registered for GST, and use your personal bank account for business.

If you do want a business account, there are plenty of benefits attached to business transaction and savings accounts, as well as business term deposits.

There are business bank accounts designed for businesses with a high volume of transactions, and those for start-ups with a small amount of trade. You could also include an EFTPOS service with your account.

Some business bank accounts charge for the number of transactions per month, while others offer a pay-as-you-go fee structure, where you only pay fees for transactions you make.

It’s up to you whether your priority is mainly transactions, or earning the maximum amount of interest on your principal. There’s a business banking solution for you if you need one.

Can a debt collector garnish my bank account?

A debt collector can garnish your bank account, but only with a court order. This drastic action is usually taken only if you’ve ignored several notices asking you to pay the debt.

If this happens, there is nothing you can do to stop it other than immediately pay back your what you owe in full or make arrangements to pay it off in installments.

Once a garnishee order is issued, your bank will put a freeze on your account as it processes the order. This usually takes two to three days and you won’t be able to access any of your money during this time.

If you have Centrelink payments, they may be protected, depending on what the court order says.

Are bank accounts frozen when someone dies?

Yes, Australian bank accounts are frozen when someone dies. If you want to close the account of somebody who has died, you might have to provide proof of death and a copy of the will. You might also have to prove your relationship to the deceased person.

If you have a joint bank account with somebody who has died, you will generally be entitled to all the money in the account. Again, you might have to provide proof of death if you want to change the bank account from a joint account to a one-person account.

How can I close a Commonwealth Bank account?

You can close your Commonwealth Bank account at any branch, provided you have appropriate identification. You can also close your account over the phone, by calling 132 221, 24 hours a day.

How do I open a bank account for a child?

There are few better ways for a child to learn about money management than through savings. And there’s a plethora of bank accounts designed specifically for young people and children.

A bank account for a child can be opened online, over the phone or in a branch in a few easy steps. The minimum age a child can open a bank account for themselves usually ranges between 12 and 14.

If the child is too young to open the account, you can do it for them as their legal parent or guardian. 

To do this, you would need to be over 18, have an Australian residential address and currently reside in Australia (or have proof of residency).

You would also need to provide:

  • Identification for yourself and the child
  • Your tax file number (TFN) or TFN exemption

Depending on the bank account, you might be able to choose what level of access the child has to their bank account (online and via the phone).

Can I close my bank account over the phone?

In most cases, you can close a personal or business bank account over the phone. In fact, this is the best way to ensure you’ve closed an account properly.

By speaking to a banking representative, you can capture and close out any pending transactions, or interest owing/payable on the account being closed.

In the instance where the account is a joint account, or you have multiple bank accounts you want to close, your bank may send you a form that you need to fill out and return.

Either way, you would be advised over the phone of the steps you need to take. Calling your bank ahead of closing an account is often a smart course of action.