The road to financial freedom can have many potholes. Here are some of the most common mistakes people make with money and how to avoid them.
- Doing too little too late: The government has deliberately set up our superannuation system to favour those who start early and stay on track. Those who leave it to the last minute often do so at their own peril. Start as soon as possible and map out your road to financial freedom.
- Paying unnecessary taxes: There are many simple, legal ways to make sure you are not paying more tax than you need. Check with your financial planner or accountant if you are making the most of the tax incentives offered by the government.
- Falling for investment fads: This probably poses the greatest single
danger to your prosperity. Tech stocks in the late 1990s and speculative miners in the late 2000s were very tempting when they were rising fast. Your best weapon against this temptation is to develop a disciplined investment plan and stick with it.
- Not protecting your assets: Wealth management is just as much about protecting your assets as it is about building wealth. Make sure you have a ‘Plan B’ to pay off your house and look after your family if you were to die or be permanently unable to work. Your ability to earn money is actually your most valuable asset, so it’s vital to protect that asset with income protection insurance.
- Not having financial goals: As the old adage goes, “if you fail to plan, you plan to fail”. If you can articulate your goals and visualise what achieving those goals looks like, you are well on your way to achieving them. Write down your three most important targets and keep them in a safe place to review at least once a year.