Many aspects of financial success are about putting good habits in place early and avoiding traps that can damage your dollar value. Here are our top five traps to avoid.
1. Make minimum repayments
Whether we’re talking about high-interest debt such as credit cards or longer-term investment debt such as mortgages, making the minimum repayment is good, but not always great. On credit card debt you can end up paying interest of 20% or more, potentially adding thousands of dollars annually to your repayments. Even small increases in your regular mortgage repayments can cut years off the loan and save tens of thousands of dollars in interest along the way.
2. Leak money to businesses
Many businesses are now moving to a subscription or regular repayment model, whether it is for software, TV services or holiday packages, because it seems cheaper and causes less financial pain in the short term. Those businesses become wealthy over time and you do not. Being aware of these regular outgoings, living a leaner lifestyle and plugging these financial leaks can be the equivalent of adding several percentage points to your investment interest.
3. Spend your redraw/equity
Paying extra into your mortgage is an exceptionally good habit. Constantly redrawing the available funds, or borrowing on the equity for non-investment purposes, is not. Keeping all of your savings within your mortgage, or in an offset account, will likely save a considerable amount of interest over time. But be sure to set yourself a budget or savings goal to reap the full benefit of your discipline.
4. Lack familiarity with your finances
We are all guilty at some stage of being less familiar than we should be with the investment mix of our super fund, or
the interest rate on our mortgage. But checking in with your finances on a regular basis – monthly, bi-annually or yearly –
is a simple way to check things are moving in the right direction and to take action if they are not. This process should always involve all stakeholders, particularly both members of a couple.
5. Prioritise spending rather than investing
All great plans begin with a goal. Wealth planning usually begins with a retirement lifestyle goal. A strategy is then set
to achieve that goal – perhaps the diversified investment of $100 every week for the next 20 years – and that becomes
the absolute priority. Households often prioritise and plan for holidays, new cars, furniture updates and wide-screen TVs.
The fact that a plan is in place means they will likely have those things. But such purchases should only be allowed after the real priority has been taken care of.
Talk to Jason Cook, Financial Adviser
All of this may seem overwhelming, but the important thing is to remain focused on your financial objectives and how you’re tracking towards achieving them. Jason can explain how any changes may affect your personal situation and your long-term financial plan.
Jason Cook, Financial Adviser, WB Financial
Authorised Representative of Financial Wisdom Limited
Phone 07 3391 7199 or email email@example.com.
General Information. This content is not advice and provides information only. It does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking to Jason Cook, Financial Adviser, before making an investment decision. Presidio Financial Services Pty Ltd ABN 67 118 833 168 trading as WB Financial, its officers, employees, agents and associates believe in good faith that this information is correct at the time of compilation but do not warrant the accuracy or currency of the information and material. You should carefully check the date of compilation of the information and material (where relevant) to determine its accuracy. This market update has been prepared by Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, (Financial Wisdom) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. While care has been taken in the preparation of this information, no liability is accepted by Financial Wisdom, its related entities, agents and employees for any loss arising from reliance on this information.