A collective understanding is that it takes a lot of luck to be financially secure and live a comfortable lifestyle, however luck is purely an opportunity. In majority cases an individuals financial state depends on their attitude, advice and self-discipline.
1. Not Protecting Your Greatest Asset
An individual greatest asset isn’t their home or car but is in fact the ability to draw income. “Lose that, and you may not be able to meet your current living expenses, let alone save for retirement” – Torr. This ability can luckily be insured through any income protection benefit. Although people like to believe the chances of them being disabled is slim, the truth is there is always a chance for an unforeseen event to affect someone’s life. Income protection is also designed to protect an individual during temporary disability too.
2. Drafting An Inactionable Will
This is a highly sensitive process for everyone, however this topic needs to be confronted with professional advice to avoid the inconvenience and expense of an unprepared will. Without advice from an expert, an individual can forget about the long-term consequences that conditions change for successors, and that estate duty and capital gains tax will take its toll on an estate. Therefore, it is imperative correct advice is given to an individual drafting a will.
3. Investing Too Conservatively
Arguably there is a great deal of relief for an investor knowing that their capital value will not experience significant fluctuations, but there needs to be a certain degree of risk to receive a pleasing return. According to Garth Leonard “being to conservative in an investment strategy can severely deplete the potential of your retirement savings.”
4. Spending Too Much On A Wedding
Possibly one of worst experiences a newly married couple can go through is starting their lives in credit. A recommendation is to rather save more for a wedding and try to keep it cost effective.
5. Succumbing To Greed And Fear
During tough times in the market individuals can lean towards alternative sources of income, because of growth they have witnessed elsewhere, a renowned example being Bitcoin. A few thoughts to consider next time you see an investment opportunity, is that there is a correlation relationship between returns and risk, also whether the person marketing this investment has a reliable background and qualification, and lastly question why a person would share a money-making opportunity.
6. Plundering Retirement Savings
An extremely common mistake is when individuals withdraw their retirement savings to pay for short term expenses, such as their child’s tertiary education, maintenance of their house or getting an upgrade on their car. A crucial factor to remember before withdrawing is that it is not just the lump sum that is gone forever, but all the potential capital growth over the remaining years until retirement that cannot be replaced. There are many alternatives that can pay for the short-term
expenses, for example it’s simpler to borrow money for your child’s education compared to borrowing money for your retirement.
7. Not Having Adequate Medical Cover
When facing the scary reality of the rapid increase in medical cover, individuals should never resort to abandoning their medical scheme as it leads to them being open to financial ruin in an unforeseen event. It’s recommended for an individual to rather investigate hospital plans offered by medical schemes and add “gap cover” to their scheme.
8. Wasting An Inheritance
Possibly one of the best outcomes that can occur when an individual receives an investment would be to re-invest the money and watch the value grow through interest, capital growth and dividends. Although one of the worst outcome is when the person depletes the inheritance and must return to life prior to inheriting, with little to show for it.
9. Not Using The Tax-Break On Retirement Funds
A massive mistake that people can make is not making full use of their tax rebates (27.5%) on retirement fund contributions. Another aspect investors should maximize is their contributions in to Tax-Free Investments.
10. Owning A Holiday Home
Owning a holiday home can be a great investment, however there is a significant amount of risk involved when it comes to the years of retirement. In most cases people sell their holiday home during retirement to assist their cash flow, but often the selling value is less then the actual value.