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.
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.”
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.
“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.”
“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.”