Do you have big goals for your future, like buying property or retiring early? A good place to start is being mindful about your spending to get ahead with saving and investing.
Beyond that, here are a few financial mistakes you could be making that could cost you:
1. You have too much cash in a savings account
Some people end up with too much cash sitting in a savings account because they’re unsure what else to do with that money and may be scared to lose it.
Whilst many advise having cash on hand as an emergency fund, the rule of thumb is that you should only aim for between three and six months of fixed and variable expenses readily available.
2. Your risk balance is wrong
If you select your investments randomly, you may find that your overall investment choices are too high or too low for your risk investment tolerance.
It’s important to understand your risk investment tolerance and when you’d want to access your investments – is it for a short- medium- or long-term goal? Once you know the answers to those things you can determine an investment strategy that is right for you.
3. Your time frame for investing is wrong
Do you know when you may want to access the funds from your investments? Are you saving or investing to meet a short- medium- or long-term goal?
Once you know your risk tolerance and your investment time frame, you can determine an investment strategy that is right for you.
4. You have too many random individual stocks, or have you allocated all your investments to the same asset class
Having a portfolio that is too heavily invested in one industry (for example, tech stocks) or one asset class (for example, Australian Shares) can be risky and not strategic. One option is to go broader by diversifying your investment portfolio and not having all your eggs in the one basket.
5. You aren’t protecting your loved ones financially
One thing you can do for your superannuation investments is make each other beneficiaries on your accounts. If your superannuation account has a nominated beneficiary, you may bypass the long process of having your assets in probate. Similarly, if your non-superannuation investments are held in joint names rather than individually, in the event of one partner’s death, the surviving partner will automatically become the sole owner, saving time and money.
If you and your partner both have a life insurance policy and have nominated each other as the beneficiary of that policy, this can ensure the other person can use your life insurance proceeds to pay for some debts and maintain the quality of life they are accustomed to if their partner passes away.
If you need help overcoming any financial mistakes you may be making, now may be the perfect time to engage or reengage with a financial planner.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
