From neglecting your finances to following the wrong advice, we’re all guilty of making mistakes when it comes to our money.
And, according to financial advisor Helen Baker, these mistakes could cost you thousands in the long run.
Here are five mistakes you can easily avoid in 2023.
1. Ignoring your finances
It can be easy to put your personal finances in the “too heavy” basket and not deal with your money at all. But ignorance isn’t always bliss, and it can be risky, especially if your partner manages all of your finances for you.
“Sometimes the person making those decisions might not be making the right decision for both of you or missing out on opportunities,” Baker said.
She recommended taking the time to look at your finances and make sure you both understand what’s going on. You may also consider getting a financial advisor who is accountable to both of you.
2. Taking the wrong advice
Sometimes it seems like everyone is offering money advice – whether it’s an internet ‘finfluencer’ or well-meaning friends and family. But following the wrong advice can be risky.
“It usually costs thousands and thousands of dollars when you get something wrong,” Baker said.
“The advice really needs to come from someone who is licensed, specialized in the field and keeps up with changes in legislation.”
3. Impulse consumption
Australians spend $13.5 billion a year on purchases they regret, with Generation Z and millennials most likely to be guilty of impulse spending.
The word “budget” could seem restrictive, Baker said. Instead, she recommended creating a spending plan where you list your essentials like rent or mortgage payments, groceries and gas, as well as things like vacations and money to invest.
“If you don’t have a plan, it’s easy to spend impulsively,” Baker said.
4. Consolidating your super
If you have multiple retirement accounts, it may make sense to consolidate them into one account to save on fees. But there are things to consider first.
The biggest issue is the insurances that come with your super, Baker said, including life insurance, income protection insurance and TPD insurance. By closing your super account you will lose those insurances.
“Very few people have clean bills of health, so they may have to keep those insurances alive,” Baker said.
5. Crystal ball
If COVID has taught us anything, it’s that you can’t predict what the future will bring. For example, Baker said most people don’t expect the housing market to boom.
“Trying to guess what’s going to happen and making decisions about what you do and don’t do is a good way to make another mistake,” Baker said.
The same logic applies to calculators that try to predict how much pension you will need in retirement.
“Life is more complicated than that, so taking the calculator as gospel isn’t a good idea either,” Baker said.
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