Groundhog Day 2019: How to avoid these common financial mistakes
It may seem unavoidable at times, but committing the same financial mistakes can leave you trapped in a ‘Groundhog Day’ spell. Not to worry! There are opportunities to learn from your financial flaws, and now is the chance to make a change. After all, new year new you!
Here are six common financial mistakes that many people fall into the trap of making, as well as some pointers as to go about avoiding them to reach your financial goals this 2019!
1. Not shopping around for comparison financial products
When it comes down to banking products such as credit cards or savings accounts, many people often stick with the same provider year after year without realising there could be better deals out there. Whether its out of loyalty or laziness, you could have a better chance of finding better rates and conditions if you don’t shop around and compare.
And shopping around can pay off. For something a little bigger, such as your home loan, you could be savings yourself hundreds of dollars in the long term if you decide to refinance. For example, if the average new home loan amount is $400,00 over 25 years and your current loan has an ongoing interest rate of 4.35% with monthly repayments of $2,189 and you refinance to a new loan with an interest rate of 3.59% and $2,022 in monthly repayments. The Mozo Home Loan Comparison Calculator shows that over the 25 year period you would save a total of $50,267 just because you shopped around and found a cheaper loan.
The same goes for you energy plan and - so it pays to shop around! Why not try it for yourself and see how much you really could be saving.
2. Carrying a credit card balance
Reaching for your credit card when you have unexpected expenses may seem like a good short term solution, however if you’re not using it responsibly it can create more future problems than you may had thought. Now is the perfect time to reset your bad credit card habits following the nationwide reforms on credit card limits that came into effect on January 1 was designed to make it more difficult to access higher credit card limits and therefore protects consumers from descending down into a debt trap.
One of the common mistakes people make with their credit card is paying too much interest when they are also carrying a balance. Set up a strategy for paying off your debt in 2019 to avoid getting caught in the interest cycle by considering the switch to a low interest credit card, or finding a balance transfer card to help reduce your interest payments and pay off your debt.
3. Not having a practical budget
Not setting a budget creates pattern of overspending and what could put you in a weak position with your bank account and all of your other financial products. Expenses such as groceries, travel costs and Netflix subscriptions are common budget offenders, however there are ways you can secure control over your funds by making some simple changes. One of the keys to sticking to a budget is keeping it as simple as possible and work out how much your expenses take out of your income. There are a range of tools such as the Mozo Budget Calculator or budget apps such as MoneySmart to work out what needs to be cut back and how much you could be saving by ditching some expenses such as your daily coffee.
4. Not saving for a rainy day
It’s never too early to be prepared for any unexpected expenses life may throw at you. Now you have your budget in check, you should consider boosting your savings account to foreshadow any unforeseen costs. How regularly should you do this? As soon as your pay hits your bank account you should transfer an appropriate percentage of it directly into your savings account until it becomes force of habit. The amount that you keep in your bank account will vary depending on your financial situation and individual needs - whether it’s to cover unexpected car breakdowns or medical bills it could be from $1000 to $20,000. Want your savings to go far? Look into acquiring a high interest savings account to achieve your saving dreams.
5. Paying avoidable fees
ATM fees are often paid out of convenience, but do you realise how much you’re actually throwing away for nothing? Other unnecessary fees such as monthly account fees and home loan servicing fees all add up, and people don’t often keep tags on how much in fees they’re actually paying. If you find that you need cash on a weekly basis, why not take enough out that will last you for the week? This can also contribute to positive budgeting habits as you won’t be tempted to spend any more than you need. Or you could consider finding an alternative account that offers no ongoing fees through Mozo’s banking section.
6. Ignoring your superannuation
Superannuation is the prime source of income for Australians when they retire, and neglecting your nest egg could cost you thousands. When was the last time you looked at your superannuation balance? You should determine how much you are paying in fees each year and compare it to other super funds to work out whether you’re deal is the best one. Taking charge of your superannuation also means figuring out whether you’re getting the value for money on life insurance features which can contribute to your overall retirement fund.
Feeling inspired to get your financial life in shape this 2019? Now is the time to revamp your financial situation, so check out our family finances section for more money savvy tips and tricks!