Too much debt can cripple your lifestyle, and expose you to excessive risk. A huge mortgage leaving you subsisting rather than living makes no sense. When thing go wrong, people with excessive debt all too often lose their homes in mortgagee sales.
Don’t wear rose coloured glasses when looking anything financial
Still heaps out there, especially by email - sometimes purporting to be from your bank. Be very wary. Even lawyers have been done for hundreds of thousands. Don’t get caught.
Higher the return higher the risk
There is no free ride – ever.
Putting your finances in the “too hard basket”
Inaction will cost you in the long run.
“I’m too busy”
Another form of procrastination which carries the same costs.
Invest in boom, despair in gloom
Be contrarian, and don’t let fear or greed make your decisions for you. Learn about behavioural finance.
Avoiding life and income protection insurances
Pay attention to insurances. Do you know what your biggest asset is? Clue - for most of us, it’s not our house.
Trying too hard to avoid taxes& getting your children a student allowance
Don’t outwit yourself with complex structures and trusts, you will spend a lot of money, and the IRD and WINZ are not stupid.
You can consume capital in retirement
Most of us will gradually have to consume our savings in retirement, especially if we live to a ripe old age. It’s OK to do so, but get some advice to ensure you’re not spending it too fast. Overall financial checkups annually might be cheap in the long run.
Is property is better than shares?
No perfect investment exists, so rather invest in bonds, property and shares.
Unless you have a 100% reliable crystal ball, diversify widely.
Applies to everything, and especially investments.
No emergency cash
No one will bail you out if you are ill or lose your job – keep 3 to 6 months income in readily available funds, but not in your bank.
Retiring too soon
You don’t have to retire at age 65 and many of us can’t afford to. Don’t stop work until you have done a full financial review and know where your income will come from.
Learn from other people’s mistakes
“Some of us learn from other people’s mistakes, but the rest of us have to be other people.” ― With thanks to Zig Ziglar
Basing too much reliance on the value of your business to fund your retirement
Save a significant amount outside your business.
Waiting for exchange rates to move back to “where they used to be”
Why would they? Rather do half now and half later.
Going into a retirement village and losing fallback options
Not too soon, and watch out for 25% exit fees if you don’t like it.
Failing to work your money harder
An extra 2% pa return over and above the bank can be huge
$100,000 x 2% = $2,000 x 25 years = $50,000
Being too cynical and not trusting or seeking advice
Research tells us that well over 50% of New Zealanders take advice from family and friends, but not everyone in NZ has been successful, so one wonders what sort of advice some people might be getting.
Conversely even the successful sometimes can only see what worked for them, and cannot necessarily see what might work for you.
No one can give you good advice unless they can ferret out all the facts pertaining to your assets, hopes, dreams and goals. This takes practice and skill.
Who is giving you advice or encouragement to do something with your money?
Why would they say that? What’s in it for them? Have they done well?
Are they qualified and experienced?
You should know this before you ever take any financial advice.
Supplied by Alan Clarke, financial & retirement adviser, & author. His second book is virtually complete, & he also writes regular articles for the media & on line – see www.acfs.co.nz
Alan is an independent authorised financial adviser (AFA) FSP26532 & his disclosure statement is available on request and free of charge.