Learn from your financial mistakes

While mistakes can’t always be avoided, you can try and learn from them, including those commonly made by others.

Learn from your financial mistakes

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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    26th Aug 2014
    This will be a topic which most will not find pleasant because they do not have the strength of character to do the hard yards to reach the goal. The model my wife and I used involved strict discipline (to the point of the ridiculous) and paying out assets rather than having a lifestyle for 30 years. Now we are reaping the benefits.
    Financial success is as a simple as a few basic rules:
    Rule 1 - live within your means and if possible very frugally.
    Rule 2 - avoid debt, especially bad debt....that's the debt on consumeables and self indulgent activites like holidays, new ars and eating out regularly.
    Rule 3 - source the LOWEST POSSIBLE INTEREST RATES and pay off your debts asap.
    Rule 5 - build a portdolio with rental property and shares.
    That's it. Gen Ys will be shrieking in their boots with this list. I mean no self indulgence? But it works. You don't need to be a high income earner but you do need restraint, a quality that not enough people have. And then when you do end up with a nice house near the beach, a new car and an investment property or two you should get used to other folk pointing you out as a rich dudes who should not be getting a pension of any sort. Such is life. I'm sure I'll get a few bites.
    26th Aug 2014
    Yes Mick, it is a good plan but even us oldies who skimped saved and then lost a lot through unfortunate circumstances such as divorce, having to move to another state and other family emergencies would have found it hard to follow, we still live frugally, do NOT go out to dinner, buy only ingredients and not packaged foodstuff (Processed) pay out debts and dues on time turn off lights in rooms when no people in them, dry clothes OUTSIDE and air them inside (Chinese Laundry in Loungeroom)
    We are struggling, I had lumbar fusion in June and am in a brace and cannot now tie my shoelaces, weed the garden etc expensive medical bills loomed and we are still reeling, now I must do physiotherapy but one of us is still working ( due to need) so I can't get a pension or health card so everything has to be paid in full. we do not have investment properties or luxuries, we just get by, luckily so far we are able to survive. I don't know what will become of us in the future, the young ones do not want us as a burden, their taxes they say should not go towards our upkeep. I do despair
    26th Aug 2014
    I understand. Life is not always fair and just. The model does not work for all and life confronts people in different ways. I hope that you see some light at the other end of the tunnel as you sound like a genuine case.
    26th Aug 2014
    Quickest way to save is not to spend
    27th Aug 2014
    Agree. But no good putting your savings under the bed. Need to invest in something which produces income + capital gains.
    27th Aug 2014
    You can also plan to work an extra year or two and then retire in 2009 when half your super has just disappeared, and your investment shares have gone to zero, and the mortgage on the investment property you just bought has now submarined. No amount of living frugally will prepare you for that. But it worked out well for the greedy New York bankers so we should be thankful for that. Maybe we should have been Robber Barons (Investment bankers) and laughed our heads off while people were being evicted from their houses.
    27th Aug 2014
    It tells you something about a financial system when bankers can cause havoc around the planet with what has been shown to be intnetional corrupt behaviour, walk away Scott free, ask for bail out money, and then give themselves hundreds of millions of dollars in bonuses. Guess who owns the system in the Land of the Free?
    Your comments about 2009 are spot on. This is when I took my super...which had fallen but was still in tact. My philosophy was to pay out my debts and to invest with the intention of producing a meagre income so that we were not reliant on a social security system which was (in the future) going to be under stress.
    Nobody ever said that investing came with a guilt edged guarantee Theo. But if one does not live a lifestyle beyond one's means and invests money into income producing assets then in the future things 'should' turn out ok. So far so good. And for the record your super has recovered all its losses by now (only 5 years later) plus some.

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