7 Money Mistakes That Are Stalling Your Savings
1. Being too generous with friends.
Borrowing or lending money to friends is a quick way to stall your savings.
To quote Shakespeare, ‘Neither a borrower nor a lender be’. Even in 1599, he knew lending or borrowing money to a friend never ended well. It’s amazing how some things stand the test of time.
Or another old saying, ‘No good deed goes unpunished’.
You get the gist. If you want to ruin a friendship or a relationship, then go for it. Loaning or borrowing money will work really well.
Otherwise, give the money as a gift.
If you can’t afford to give it as a gift, then don’t give it—especially if you value your friendship or relationship.
Lending money to friends is also an easier mistake to make when you’re saving without a plan.
2. Saving without a plan.
People place more emphasis on planning where they’ll have coffee with their friends than planning how they’ll manage their wealth. It shouldn’t be this way!
Planning underpins everything. It is almost impossible to save effectively without a plan.
You don’t need the most detailed and comprehensive financial plan, but you need to have something.
3. Having a habit with credit cards.
When you are shopping with a credit card, it can almost feel like you’re spending ‘free money’, and that’s an easy habit to fall into.
I’m not sure about you, but I’ve become so lazy that I don’t even enter my pin. Why? Because when I don’t have to do anything other than tap a card, the money really does feel free.
Credit cards are probably the greatest consumer-boosting tool ever invented.
The problem is that you don’t need to be encouraged to overspend.
When the credit card bill arrives, that ‘free’ money very quickly becomes real money—with interest.
Do yourself a favour and, as soon as you catch yourself thinking of a credit card as free money, stop and carefully think about why you are about to make a purchase.
Use cash whenever you can.
Try having a ‘cash-only’ week. It’s a great way to figure out where you spend money and what you enjoy spending money on.
Once you understand why you spend money, it’s easier to reduce your expenses and set a budget you can stick to.
Going without credit cards may make you question other financial decisions you might make, like what insurance you have. But don’t give up on all your insurance! Going without life insurance can be a big mistake.
Having a plan can also help stop you from falling into the next trap.
4. Going without life insurance
This is a huge factor for families. If you are single with no attachments and millions in the bank, then that has different implications.
But if you are a family-oriented person, you absolutely need insurance. Find out why here.
At the very least, you need life insurance and permanent disability insurance to cover your mortgage and loss of income. Income protection insurance is also worth considering.
Australia has some of the best-priced insurance and most beneficial payouts in the world.
If you’re not sure what insurance you need, have a chat with your financial advisor, and they will put you on the right path.
Insurance may get you thinking about your income. That leads to the next big mistake!
5. Not managing your career
Your regular paycheck is your largest earner. Please don’t take it for granted.
I could do an entire segment on career management! But to get started, here a few of the most common career mistakes I see:
- Not negotiating your salary. This seems to happen all the time! Your salary is negotiable. Push for more.
- Not networking after you land a new job. When you are working with senior staff and managers, treat every task and project you are involved in like it’s part of an interview for your next role. You never know what opportunities are around the corner.
- Not being open to learning new skills. Don’t rest on your laurels. Find out what skills you need to take the next step in your career and learn them.
- Not understanding your role. Get clear on what your boss expects from you. Work together to negotiate your goals or key performance indicators and set your priorities to ensure you meet those goals. Are you looking for professional development? Include goals that allow you to learn new skills and boost your career prospects. It’s a win-win.
- Not keeping your options open. The best way to negotiate in any role is to know you can walk away at any point. In my career, I always had a plan B and plan C. Always. Do you?
- Burning Bridges. This is too easy to do. Keep good relationships with people. You will become known for it, and it will work in your favour when you least expect it.
When your career is looking to take off, it can be tempting to buy your dream home. But if you can’t afford it yet—don’t do it!
6. Buying a home that is too big with a mortgage that is too big to manage
Mortgages are the best example of good debt vs bad debt.
Regardless of where you stand or how you feel about having a mortgage, remember: a large home tends to fill up with lots of things, and those things most definitely depreciate.
Having a house that is too large is a burden, and it rarely makes you happy.
7. Neglecting your super
Just as your home is an asset that’s all yours, superannuation is your money. You are going to want it when you retire.
If you start managing your super from an early age, you will see the return on investment sooner rather than later.
Why? Because the earlier you start investing, the more time you give your money (and investments) to grow. As they grow, they will gain momentum, and you will begin to build significant wealth.
In some cases, if you start investing early enough, you may be in a position to know that you have enough money to retire by the time you are 40 (I did!).
And the great thing is, once you know that you’re safely covered for your retirement, you can relax and spend a bit more of your regular income on yourself. In other words, you can treat yourself early or retire early if that suits you.
- If you can’t afford to give money to friends as a gift, don’t give it.
- Keep your financial plan handy (even if it’s a simple one).
- Don’t reach straight for the credit card.
- Investigate what insurances are right for you.
- Don’t take your paycheck for granted; think about how you can make more money.
- Buy a home you can afford.
- Start managing your super now—it’s never too late.
Have you tried to tackle any of these mistakes on your own? Share your experiences in the comments below!
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Who is Paul Atherton, That Wall Street Guy?
An ex-Wall Street advisor who worked with major players in the global financial industry for over 30 years, Paul’s mission is to help regular people reclaim their wealth and financial security.
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