Retirement Income

Tue, 4 Jun, 2019Joanita Wibowo

3 common money mistakes that Aussie women make

3 common money mistakes that Aussie women make

Dealing with personal finances can be a stressful and uncomfortable experience. Many women are likely to think that they are simply “not good with money”, and this attitude is often reflected in their hesitance to take charge and manage their finances.

However, this may lead women to be worse off. A 2018 HILDA survey found that women had lower levels of financial literacy than men – one in two men (49.9 per cent) could answer five financial literacy questions correctly, compared with only about one in three women (35.4 per cent). Low financial literacy is linked with poor financial wellbeing – indeed, women and those with low financial literacy are more likely to be in poverty.

To help relieve this problem, it could be helpful to learn where we are doing things wrong and how we can improve our money habits. Susan Edmunds, senior business journalist and author of Starting Out Starting Over: A single woman’s guide to money in Australia, dissected some of the most common financial mistakes Aussie women make.

1. Not taking interest in money

Edmunds said finances may seem too boring or too difficult of a topic to understand. “Some women decide to leave all their financial decisions up to other people – often a partner – or they decide it’s not something they’re interested in or are not any good at and just sort of disengage.”

However, this may leave them exposed to problems. “At best, this means that they end up missing opportunities and at worst it can leave them really vulnerable – particularly if they’re used to money being someone else’s problem and then that someone is no longer around.”

2. Mixing up emotions and money

When it comes to family members who are struggling, many women may feel obliged to help out in any way they can, including financially. But Edmunds advised to examine your own situation before giving a hand to others.

“It’s like a plane oxygen mask – you have to take care of yourself first,” she said.

“I’ve seen women burnt by going guarantor on a partner’s property – who then turns out to be terrible with money – or by offering loan after loan to their kids, which are never repaid … Your kids might not thank you for those loans if they mean you have to shift into their spare bedrooms when you retire with no money left!”

The same goes for separations. While settling things as early as possible may be a priority, Edmunds said women should not shy away from asserting what they are entitled to. “Even if your ex is the most reasonable person in the world, you need to get independent advice on what your entitlements are, then make sure you get them,” she said. “It’s not worth ‘keeping the peace’ if it means you set yourself up for a lifetime of financial struggle.”

3. Not thinking through retirement plans

Edmunds said retirement planning is something that tend to be overlooked. “So many people seem not to want to think about it at all,” she said.

However, a strategy to manage money would be necessary considering that Australians are living longer. According to a 2018 report, the life expectancy of Aussie women is among the world’s highest at 85.46 years, meaning that you could still have decades of life ahead of you from retirement.

“It’s not really appropriate to pull all your money out of your investments and put it in a savings account,” said Edmunds. “You need to make sure that you have some way to preserve your capital to get you through those retirement years.”

To ease the transition process, Edmunds recommended phasing out work gradually. “For many people, stopping suddenly isn’t realistic for a whole lot of financial and emotional reasons,” she said.

“Some of the happiest people I’ve seen have been those who’ve been able to slowly pull back from work over time, perhaps with some consulting or part-time work.”

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Starting Out Starting Over, New Holland Publishers RRP $29.99 - available from all good book retailers or online.