Money moves that will haunt you in the future
We can all make bad decisions with money, but to avoid long-term financial loss look out for these common pitfalls.
Don’t ignore your super – Most new retirees wish they had put more into super when they were younger. Deciding to ignore the generous tax benefits and incentives provided by superannuation may haunt you in 10, 20 and 30 years. From tax savings through salary sacrifice to government co-contributions for low and middle-income earners, if you’re still earning an income there are lots of ways to feather your retirement nest.
Don’t leave insurance too late – Personal insurance such as life and disability cover are cheaper to buy when you’re younger and healthier. Leaving it until later or after an illness or injury can lead to sky-high premiums or a new insurance policy being denied.
Spread your eggs – Diversifying investments is important for financial success, yet many people focus on high-risk moneymaking ventures rather than putting their eggs in several baskets. These have a very low probability of reward and some people spend their whole lives investing in these ventures and then recovering only to do it again.
Too much debt – High-interest consumer debts can hurt your finances for many years. Credit card interest rates are around 20 per cent and other short-term finance options can be even more expensive.
Keep up your private health cover – Private health premiums are rising again, but people who cancel to save some costs now with a view to signing up again later will be penalised. The Government’s Lifetime Health Cover rules add a 2 per cent loading for every year over 30 that someone does not hold private hospital cover, up to a 70 per cent maximum loading.
Don’t get impatient with investments – Exiting an investment that has struggled for a few months can be a ticket to regret. Financial markets move in cycles and keeping a level head during tough market periods will pay dividends in the long term.
Overcome fear – Fear often drives financial decision-making: fear of the unknown, fear of losing money, fear of missing out on a big win, or fear of failing to keep up with the Joneses. Financial planners say it’s easy to be spooked by money matters, but taking small, regular steps in your learning and in your actions will help overcome fears.
The strain of constantly worrying about money is a substantial barrier to the smart decision-making. Instead, curb your fear and arm yourself with good advice to map out where you want to be in your financial journey both short and long term.
You may have to start small but with a solid investment plan, you can avoid careless money moves.
Related links:
Foolproof budgeting for retirement
5 money lies we tell ourselves that are bleeding us dry