Most of us accept we’ll make mistakes in life. Our dilemma when it comes to money mistakes is that there’s an ick factor associated with talking about money. This means we’re not keen to pop our hands up and say we messed up financially. Which means we don’t learn from each other’s financial stuff-ups.
Which is exactly why we need to talk about it. So, what are the money mistakes you need to look out for and how can you avoid them at each life stage?
Uni students: With easy credit and student loans it can be tempting to defer a large portion of student life. Yes, it’s incredibly tough to work two or three jobs and study but it’s far better to walk away from uni with only a HELP debt rather than a stack of other debts you need to pay back. If you’re financially struggling maybe consider working full-time and studying part-time or working for a year, building up funds and then head to uni with more time and more dollars.
First Job: You’ve decided to enjoy your first year of work and get serious about
savings later. Before you know it, three years have passed and you have nothing to show for all your hard work. Your friend meanwhile has racked up some nasty credit card debt trying to keep up while another has a large loan for a new car they just had to have. Sure, you want to enjoy life but get into the habit from the moment you start working to automatically transfer a percentage to a savings account you can’t access.
Singles: The danger for singles is that they financially press pause until they meet a future partner. Singles need to reject the money message that a man (or woman) is a financial plan and start building assets yourself. Without a partner to help with the cost of home-ownership and sharing the bills you might need to consider other options or become more flexible. This might include taking in a boarder until you can manage rent or a mortgage on your own or perhaps buying an investment property in your own name or an SMSF instead of buying your own home and renting instead.
Coupling: When you’re in the first blush of romance you don’t want to think about protecting yourself financially but nasty STDs (or sexually transmitted debts) can derail us. With money being the number one thing couples fight about it’s important to talk about money early, to insist on transparency and to understand the financial ramifications of any financial product. This might be a phone you’re purchasing your partner as a present through to signing a lease or agreeing to be the director of a company.
DINKS: Couples who are childfree, which includes myself, are generally in a unique position financially. We don’t have the additional financial burden of children such as food, childcare or school fees and generally have higher discretionary incomes. The trick is to ensure you are still enjoying life but also understanding what your goals, values and priorities when it comes to money are so you’re tempted to save, not spend. This might include planned sabbaticals, extended trips away, helping nieces/nephews or starting a charity.
Families: We might think we won’t try to keep up with the joneses but when your friend’s child is going to a private school, has a new bike and the latest gadgets and your child starts asking for them are you going to fall into the guilt trap? It’s important to understand that getting yourself into trouble financially is not helpful for your family. It’s important not to become financially stressed and put pressure on your family relationships by not overextending yourself whether that’s with the size of your mortgage, the choice of school or any number of things parents feel they should be doing.
Consciously uncoupling. It’s a fact of life that many couples will split and often the only ones that win are the lawyers. It’s incredibly important to receive great advice early on so you know what you should and shouldn’t be doing but whenever possible, agreeing on a fair and equitable split early on means you can start again with more dollars in your pocket. It’s also important not to let emotion get the better of you which is much easier said than done. Don’t do what I did and give the entire pot to charity so you start with a ‘clean slate’. It sounds great in theory but it’s all about looking after yourself financially for the long term.