Finance
Managing Your
Money
Mistake 3:
common
finance
mistakes
Mistake 1:
Spending more than you earn. Another term that I use for this
is ‘financial discipline’, which is essentially as simple as it sounds. If
you earn $100 per week, stop spending $120 per week – you need
to understand what your NEEDS are versus what your WANTS are.
Some people believe that paying a few extra dollars isn’t a big deal,
however, it can significantly impact your budget. Spending
more than you earn will always have a negative impact
on not just your financial life, but your personal life.
It is important to know your fixed expenses and have
a cash-flow plan that ensures you can cover all your essential bills and expenses. This includes your mortgage
or rent, food, school fees, petrol, car payments and insurance. Then, if you have money left over, either save
this towards another need or use it to reduce your
debt. Spending LESS than you earn is an excellent first step.
Mistake 2:
Living on debt. How is it possible to
spend more than you earn? Simple,
by living on debt. This is in the form
of credit cards (most common) and
other short-term loans such as car
loans, and because so many transactions are now paperless and
cashless, it’s easy to get caught
out. Putting it all on credit cards
is risky, particularly as they are
quite easy to attain, which
means that when you reach your
limit, you can apply for another
one. There is also the danger of
only meeting the minimum credit interest payments, which results in a debt
that will take you years to get out of. Borrowing money is easy, but paying back from
your own funds can be complicated and can
start a chain of financial problems.
By Duncan Buchanan,
CEO Intelligent Investing
24
www.smpmagazine.com.au | Autumn 2016
Buying the new and big stuff NOW. The modern lifestyle demands everyone to have the nicest, newest and shiniest thing NOW
– or does it? Well, some people seem to think so. Start small and
with what you can afford, and as you learn more, earn more and
become more financially intelligent, then you can upgrade.
So many people want the house of their dreams as their first
home, or the lovely new, shiny car as their first car. They end up
accumulating mountains of debt to get the best thing straight away
instead of working their way up to it. Consider what the real need
is again versus your want – you can still enjoy your lifestyle and save
– and leave your ego aside.
Mistake 4:
Living from one pay packet to the next. This is as much of a mistake as the others. Sure, you have your bills covered and you may
not be driving the latest, flashiest car, but what are you saving and
what are you investing? If the answer is nothing, then you are making the second most common money mistake.
A rule of thumb is learning to pay yourself first and save
10 per cent of what you earn. Put it to one side and invest it
when it is large enough to do so. Consider different ways
to generate extra income or reduce expenses and have a
target.
Mistake 5:
Not learning how to play the finance game. The world
of money, finance and investing is just a game,
and you need to know how to play it. You