Everyone has made mistakes, after all, we’re only human, and it’s likely that some of our mistakes relate to finances. While mistakes can’t always be avoided, you can try and learn from them, including those commonly made by others.
Some financial mistakes are more common than others so YOURLifeChoices thought it would be a good idea to ask Craig Hall at the National Information Centre on Retirement Investments Inc. (NICRI) to list those which occur most often. By avoiding these mistakes, you can give yourself and your family a better chance of securing a stable retirement.
If possible, avoid getting into debt when purchasing assets that do not offer growth or income returns. This means items such as cars, holidays and electrical equipment. As there may be valid reasons such as needing a car to get to work, or essential items for the family home, this can’t always be avoided. But the effect of this is that you end up paying interest on top of the purchase price and by the time the loan is paid out, you end up with an asset that has depreciated in value. Consider if it is possible to save for these items if you don’t need them straight away.
Budgeting is important as this can give a true picture of your ability to make ends meet. It can also highlight potential savings, which can accumulate to meet future goals and/or repay debt faster. It also shows a true reflection of your cash flow, which allows you to manage your money in months of high and low expenditure. Keeping extra expenditure low in months where outgoings are low allows more funds to cover ‘high expense’ months in future.
Keep credit card balances to a minimum. You may have different reasons for keeping credit cards, such as convenience when travelling, a back up in case of emergencies or to pay all your expenses. Interest rates on credit cards are comparatively high, so the trick here is to repay the credit card as soon as possible to reduce the interest charged. The second tip is to keep your credit limit to a minimum, thereby reducing the risk of purchasing goods without saving for them. You can also opt out of credit limit increases from your financial provider.
Pick investments according to the time frame which you’re happy to have your money tied up for and keep cash reserves so that you can use them in times of need. This will help avoid the need to sell off assets at a reduced value (see next point). Diversifying and sticking with time frames means that if markets are volatile, you can draw on cash while giving your growth assets time to recover and hopefully give a good average return by the time you do require the funds. It is essential that you set yourself goals for both the long and short-term as, without them, the choice of investment may be inappropriate.
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