The world is constantly dangling temptations before our eyes, and it’s never been easier to buy stuff, even if we don’t have the money. The upshot is that we are all susceptible to making some basic financial errors. Individually, these mistakes can be small. Added together, they can really hold us back from financial success.
Adding up the little things
Take one simple example. It’s easy to spend $15 on lunch from a café. But make your own and you could easily save over $10 per day. Multiply that by your working days and you could be saving over $2,000 a year!
How about the great clothing trap? Every year Australian’s throw away huge amounts of clothing that has never been worn, or only worn a few times. Then there’s food. The average household throws away over $1,000 worth each year.
Add in other impulse purchases and it’s easy to fritter away many thousands of dollars on unnecessary or impulse purchases each year.
Big savings
Other common (and often bigger) money mistakes arise from our poor use of debt:
- If you don’t pay off your credit card balance in full during the interest-free period, you’re spending more than you earn, and you could be digging yourself a debt hole that can be very hard to get out of.
- If your impulse buys rely on the use of ‘buy now pay later’ services, it’s a sign that you probably can’t afford them.
- Borrowing to buy things that immediately fall in value, such as a new car, is another quick way to blow some big dollars.
- Even when buying an appreciating asset, such as a home, purchasing above your needs can leave you struggling to meet repayments, adversely impacting your financial position, being realistic and having smaller debt will reduce your costs and help you build equity faster. This approach will enable you to trade up, or increase your property portfolio.
Finding a purpose
For many people, just being aware of these money mistakes is enough for them to avoid the traps. For others, the instant gratification of the purchase or the pleasure in zipping down the road in a flash new car can make it really hard to adopt new habits. But what if there was a clear, long-term reward for suppressing the desire for instant gratification? This is a personal choice, and could be a holiday, home upgrade, achieving financial independence or even early retirement.
Setting some clear goals can make it much easier to forgo that focaccia and flat white in favour of a homemade (and just as delicious) sandwich. How many DIY lunches equal a week on a Greek island?
My Mum always said that there is a difference between what you want and what you need.
Have you heard the saying ‘People don’t plan to fail; they fail to plan?
Or each time you suppress the urge to buy something you desire but really don’t need, give yourself a mental pat on the back. You’ve just brought forward the day when you can buy that new house or work becomes optional. Having a plan is place and charting your progress can help you see what you’re achieving and help you maintain your motivation.
So have a think about your financial habits, and see how many fit into the basic categories of financial mistakes – spending too much, not saving enough, and making poor use of debt. Then work out the goals that are important enough for you to ditch the bad habits and develop good ones. You might be surprised by just how much some simple changes can contribute to your financial success.
Most of us need to be held accountable, Financial Advisers are professionals that can help you put financial plans I place, hold you accountable and review your plans and needs to ensure you reach your desires financial goals.
Christine Swanson is qualified professional adviser so you can ensure all your decisions are well-informed and that your personal needs and goals are considered.
Women are proving themselves very capable investors, just another reason for women to take control of their futures.
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