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 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.

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.

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.

Can you open another account at the same bank?

Yes, you can open another account at the same bank if you already have an account there, but some banks place a limit on how many specific accounts you can open.

Generally, though, it is possible to have more than one everyday account, one personal account and one joint account, or have different types of accounts – such as a transaction account and a savings account.

Keep in mind that some bank accounts come with fees, so you could be charged twice for having two types of the same account at the same bank.

Also, if you have more than one high-interest transaction account at the same bank, only one account will be able to earn the highest rate of interest.

Can foreigners open bank accounts in Australia?

Many Australian lenders allow foreigners to open bank accounts in Australia. Often, this can be done before you arrive in the country – with no Australian address required. When you get to Australia, you can pick up your debit card, using your passport as identification.

Can you find your bank account number online?

If your bank offers online services, you should be able to find your bank account number online by logging into your account on your bank’s website and checking your details there.

Keep in mind that each type of account you have with a bank comes with a unique account number. This means if you have a bank account as well as a savings account, for example, your bank account number and your savings account number will be different.

If you don’t have access to your bank account online or can’t login, you should be able to find your account number on a mailed bank statement, if you have one.

Alternatively, you can call your bank’s customer service number or visit a branch to retrieve your account number.

How can I find bank accounts in my name?

To find ‘live’ bank accounts in your name, you’ll have to ask individual lenders, which involves contacting them one by one and proving your identity each time. To find ‘unclaimed’ bank accounts (those that have been inactive for at least seven years), you can use this website.

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.

Can I open a bank account in another country?

Despite having a bad rap for facilitating tax evasion, it is possible and legal to open a bank account in another country, also known as an ‘offshore account’.

Some people choose to open a bank account in another country to invest overseas, for higher interest-earning potential or to access foreign banking services.

The process for opening an offshore bank account differs depending on the financial institution and country in which you’re opening the account.

Typically, you will need to provide identification such as a passport, a local bank statement and a signed declaration proving the source of the money being used to open your account. Usually, deposits into offshore accounts can be made by international money transfer.

How do I close a bank account?

Closing a bank account is one of those tasks that’s easy to put in the too-hard basket. There are quite a few steps involved, some which may require you to hang on the phone for a while.  

Here’s a handy checklist of items to tick off, so the job gets done quicker. If you don’t do your banking online, the following steps can also be done at a branch.   

  • Cancel any scheduled or recurring payments
  • Update your direct debit details (such as loan repayments) with creditors
  • Export your payee address book (to keep a record of saved third-party bank account details)
  • Transfer the balance of your account (to the new bank account)
  • Close your account online, or by calling the bank or visiting a branch

How do I open a bank account for a baby?

If you’ve just welcome a new baby into the world, congratulations. Opening a bank account for your child can be a wonderful first gift.

Before you can open your child an account, you’ll need to have a birth certificate or passport for your baby.

As the parent or guardian, you’ll also be listed as a joint holder on the account. This means you’ll need to have proof of your identification and address (a driver’s licence, passport, birth certificate or Medicare Card).

Many banks and credit unions offer baby banks accounts. Usually, you can apply online; otherwise you can head into a local branch or office with your documents.