Money mistakes you can’t afford to make

According to Australia’s Biggest Health Check, 49 per cent of women aged 25-39 say “financial concerns” stress them out the most. To help you avoid money slip-ups that could threaten your long-term fiscal security, we asked financial gurus to offer fixes for common money stuff-ups we make.

Spending too much on gifts

FIX 1 Before starting your Christmas shopping, establish a spending limit for each person you’re buying for. “Just like Vegas, you [need to] put a cap on what you’re going to gamble before you get to
the table,” says neuroeconomist Dr Paul Zak.

FIX 2 If you find something amazing for your mum, but it costs more than the limit you’ve set yourself, walk away from the cash register. On seeing something desirable, your brain releases the feel-good chemical dopamine, which spurs you to pursue the reward. Think for a day or two to weigh up the pluses and minuses.

Paying off debts in the wrong order

FIX 1 It’s the “small” stuff like your credit-card debt – rather than that big balance on your HECS-HELP debt or mortgage – that can really do you in, so pay off your credit card debts first. If you have several to kill, Liz Pulliam Weston, author of Easy Money, recommends starting out with the card with the balance closest to its limit – as maxing out or carrying a high balance damages your credit rating, which can even affect buying property later on. Once it’s down to half the credit limit or less, start on the card with the highest interest rate.

FIX 2 To make big-ticket balances like mortgages more manageable, consider refinancing – it can actually lower your interest rate, reduce your monthly payment, or even shorten the life of your loan without too much of an increase in what you pay each month.

Waiting to save

FIX 1 There are so many different types of investments you could make in your future – which to put your dosh into and in what order? Steve Davis, general manager of personal financial services at Australian Unity, lets us in on the order of importance:

A “Save for a home deposit.”

B “Pay extra off your home loan if you can – it’s a guaranteed seven per cent per annum return tax free, especially in a home loan where the money can be accessed if necessary.”

C “Put aside an emergency fund of $5000 to $10,000.”

D “Commence either a regular savings and investment program or a gearing program – in both cases, invest in high quality growth assets like shares, property and managed funds.”

E “Regularly contribute extra to super.”

F “Contribute to super with one-off lump sums, eg, from an inheritance or redundancy.”

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