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 adviser Helen Baker, these mistakes could 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 into the “too hard” basket and not deal with your money at all. But ignorance isn’t always bliss and it can be risky, particularly if your partner manages all your finances for you.
“Sometimes the person who is making those decisions might not be making the right decision for both of you or be missing out on opportunities,” Baker said.
She recommended setting aside time to look at your finances and making sure you were both across what was going on. You could also consider getting a financial adviser who would be accountable to both of you.
2. Taking the wrong advice
Sometimes it feels like everyone is offering advice about money – whether it’s a ‘finfluencer’ on the internet 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.
“Advice really needs to come from somebody who is licensed, specialized in the area and keeps up with the legislation changes.”
3. Impulse spending
Aussies spend $13.5 billion annually on purchases they regret, with Gen Z and Millennials the most likely to be guilty of impulse spending.
The word “budget” could feel restrictive, Baker said. Instead, she recommended creating a spending plan where you list out your essentials like rent or mortgage repayments, groceries and petrol, as well as things like holidays and money for investing.
“If you don’t have a plan, it’s easy to impulse spend,” Baker said.
4. Consolidating your super
If you have multiple superannuation accounts, it might make sense to consolidate them into one account to save on fees. But there are things to consider first.
The biggest issue is insurances that come with your super, Baker said, including life insurance, income-protection insurance and TPD insurance. By closing a super account, you will lose those insurances.
“Very few people have a clean bill of health, so they may need to keep those insurances alive,” Baker said.
If COVID taught us anything, it’s that you can’t predict what the future will hold. For instance, Baker said most people did not expect the property market to boom.
“Trying to guess what will 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 goes for calculators that try to predict how much superannuation you will need for retirement.
“Life is more complex than that, so taking calculators as gospel isn’t a good idea either,” Baker said.
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