Avoiding these savings sins may help you regain the upper hand.
Are you a financial sinner? Are you guilty of burying your head in the sand when it comes to savings? While some of our fate financially is in the control of others, certain behaviours or ignoring warning signs can be costly.
Avoiding these sins below may help you regain the upper hand on your retirement income and spending.
Be a negative Nelly
People generally fall into two categories – glass half full or glass half empty –and unsurprisingly, it’s the pessimists that tend to have a bit more money in retirement. Everyone needs a little positivity in their lives, but when it comes to money, it pays to plan for the worst. Take the pain out of saving by creating an automatic deduction paid to your super fund or an account that is a little more difficult to access. The value of compound interest even on a small amount each month is surprising over the longer term.
Spending like it’s going out of fashion
Shiny and new is nice, but very rarely is it necessary, and the ensuing buzz doesn’t really last that long. As most of the fun in buying a new toy, gadget, car, etc., is in the planning and research, spend your time doing just that and keep your credit card safely locked away.
She’ll be all right
Oh no she won’t – not if you’re talking about your retirement savings anyway. Whether it’s lost or unclaimed super, old bank accounts or non-performing investments, doing nothing could be costing you a pretty penny. Take the time to track down any unclaimed super and then review which super fund is best for you. Find out which fund has the lowest fees and best returns and consider switching. You can also do a search on Moneysmart.gov.au for old bank accounts that may have been transferred to the government due to inactivity. This is still your money and you can claim it back.
Don’t be impulsive
Just as costly as doing nothing can be jumping in and acting without thinking it through. Take it with a pinch of salt when friends and colleagues tell you about a great investment that’s making them a fortune without any risk – every investment has risk and no one investment is right for everyone. Also, before you dump an investment that’s not performing well at the present time, find out what the long-term projections are – some investments are meant to deliver over a longer period and you could waste money in fees by getting rid of it.
Don’t rely on instinct
Trust is a wonderful trait but when it comes to financial advice, it has to be something that is earned. It’s not enough to rely on a recommendation or to trust your instinct that someone is a ‘good guy’. Don’t be afraid to ask your planner difficult questions and if you’re not happy with the answers, simply walk away. It’s important to remember that no one will give you advice out of the goodness of their own heart – so ask what’s in it for them.
Risk and return
Investments with higher returns often come with a much greater risk, so ask yourself if you can really afford to lose money. Gordon Gekko may have believed that ‘greed is good’, but the reality is that it’s often the undoing of the not-so-savvy investor. Don’t enter into any investment or deal without having your eyes open and fully understanding the risk involved.
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