skip to Main Content
Five Financial Mistakes People Make With Their Money

Five financial mistakes people make with their money

Whilst we can easily Google “how to achieve financial success” and read about the “gurus” who are self-made millionaires, I believe we can often learn more from the mistakes that others have made rather than their successes.

Implementing a system that defines your financial decision-making process will ensure you are disciplined in times of uncertainty or volatility.

Understanding the negatives of any potential investment will ensure you remain committed when the value may be less than the purchase price.

 

We will review five investment themes that may potentially help you avoid making the same mistakes.

Investment Properties

Understanding your priority and purpose for an Investment Property from the outset will help when unexpected costs arise. If you plan on developing, adding a granny flat, renovating or simply holding – be clear on your intent from the start and understand all the costs involved in each of the options you are considering and speak to a professional.

Avoid:

  • Buying investment property in places you know, instead of considering what’s the best investment option.
  • Failing to consider or understand all the ongoing costs, likely repairs and potential maintenance required.

Research

When investing in Property, Shares or any form of Investment, take responsibility for your investment choice and conduct your own research.

We recently purchased an investment property in Newcastle on limited title which resulted in approximately $10,000 of additional fees and a 3-month process to transfer to Torrens title. This is really important as some lenders won’t lend on a limited title, resulting in higher costs and interest rates being applied. While it’s now resolved, if we had asked for a title search or asked a few simple questions, we may have made a different decision.

Avoid:

  • Rushing or short cutting your research.
  • Making decisions based on limited information.

Knowledge

One of the best sayings I have learnt recently is “if you don’t understand, don’t invest”. You need to learn about where you are going to invest your money and take ownership of the decisions.

The reality is, all investments will have a level of volatility and if you understand why it’s going down in value, it’s a little easier to hold onto them when they are worth less than when you purchased them.

Our Financial Advisers will be able to provide information that’s relevant to your personal position or a great reference tool is the ASIC Money Smart website: https://www.moneysmart.gov.au/

Avoid:

  • Failing to understand where and how your money is invested and the characteristics of your investment options.

Last year’s star investment

Chasing last year’s best returning investment product or rate of return historically leads to a poor result, yet substantial money is spent on advertising in the weekend’s paper to promote last year’s best results.

People chase returns because they believe that it is the only way they can achieve their financial goals and will make poor decisions as they may miss the fundamentals that everyone else can see.

Avoid:

  • Basing your investment choices purely on historical returns.

Assets produce income

It’s a simple theory: holding assets that produce sufficient income to meet your lifestyle = financial success.

However, you can then increase the benefits of this strategy by considering:

  • How and when the income your assets produce will be taxed?
  • Can you lower your taxable income, e.g. can you own the assets in the lower earning spouse’s name?
  • What is the most beneficial the tax structures (including the use of Superannuation) to own the investments?

While it’s challenging to achieve investment income in this current economic environment, we have many options available that might suit your investment objectives and timeframe for investment.

Time in the market v timing the market is another simple and effective investment philosophy.

Avoid:

  • Failing to consider all aspects of your investment structure i.e. focusing on returns.

 

Our office provides comprehensive financial advice from a team of specialists, ready and willing to help you achieve your financial goals. Take the first step and book an initial consultation at one of our office locations in The Junction, Erina, Terrigal and Sydney CBD.

 

The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group They cannot be reproduced in any form without the express written consent of the author.
This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice.
DJIB Investments Pty Ltd T/A Newcastle Financial Planning Group is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429. This editorial does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information, please contact our office to opt out. The views expressed in this publication are solely those of the author; they are not reflective or indicative of Licensee’s position and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author.>

Back To Top