We lock up our homes to avoid being burgled, yet there are many other ways people are being robbed of their money. Keep your finances safe by avoiding these common traps.
1. No money for emergencies
An unexpected emergency can wreak havoc with your financial commitments if you haven’t kept a ‘rainy day’ fund. Keep this fund separate to your savings and everyday money, and aim to save enough to cover your expenses for 1 to 3 months. Know that it can only be touched in the event of real emergencies and top it up again after you use it.
2. Inadequate insurance
Although it’s tempting to drop your insurance or reduce it down to the bare minimum as a way to save money, there’s nothing worse than getting caught without insurance when you need it. Building and contents insurance, Life insurance, Mortgage insurance and Income Protection insurance will make perfect financial sense the day something happens and you need the payout!
3. Not paying off the credit card balance on time
Never get lured into paying just the minimum off your credit card as this will significantly increase your interest repayment. If you can’t afford to pay off the balance on time you are simply throwing money away.
4. Ignoring your superannuation
Many of us put off planning for retirement, hoping that it will sort itself out or that our super contributions and super growth will be enough. The sad truth is that superannuation can no longer be relied on as a sole source of funds, and it’s never too early to investigate ways you can optimise your financial security by looking at options like investing in property through a self managed super fund.
5. Using interest-free credit
“No interest for 12 months” might sound great when advertised for credit cards, loans or store bought products, but the repayments take into account this period and the interest rate is usually higher in the end. In the fine print you may also find that if you default on the terms just once, the interest will be backdated for the interest-free period.
6. Focus on the pain, not the gain
You give in to impulse buys or unplanned purchases because you have lost focus of the big picture and what you can achieve if you stick with your financial goals.