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 can be costing 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 hard” basket and not manage 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 who is making those decisions may not be making the right decision for both of you or may be missing out on opportunities,” Baker said.
She recommended setting aside some time to look at your finances and make sure you were both seeing what was 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.
“Usually it costs thousands and thousands of dollars when you have something wrong,” Baker said.
“Advice really needs to come from someone who is licensed, specialized in the area, and up to date with legislative changes.”
3. Impulse spending
Australians spend $13.5 billion a year on purchases they regret, with Gen Z and Millennials the most likely to be guilty of impulse spending.
The word “budget” might sound restrictive, Baker said. Instead, he recommended creating a spending plan in which you list your essentials, such as 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 several superannuation accounts, it may make sense to consolidate them into one to save on fees. But there are things to consider first.
The biggest issue is the insurance that comes with your super, Baker said, including life insurance, income protection insurance and TPD insurance. When you close a super account, you will lose those insurances.
“Very few people have a clean bill of health, so they may have to keep those insurances alive,” Baker said.
5. Crystal ball
If there’s one thing COVID has taught us, it’s that you can’t predict what the future will hold. For example, Baker said most people didn’t expect the housing market to thrive.
“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’ll need in retirement.
“Life is more complex than that, so taking calculators as gospel isn’t a good idea either,” Baker said.
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