The majority of people make some financial mistakes throughout their life and might not even know, says Simplicity's personal finance expert Amanda Morrall.
Often those mistakes can be blamed on things like a hectic schedule or lack of knowledge. But Morrall said small mistakes could land you in big trouble.
She said most people approach money from the wrong perspective, which can lead to them becoming buried in debt.
“Banks and other lenders are not unlike drug dealers. They love to get you hooked and they love life-long customers,” she said.
But taking on debt isn’t the only mistake people make. Here are the top five mistakes Morrall sees:
Morrall told Newshub the biggest money mistakes people make happen through ignorance and neglect.
“If your prevailing attitude is one of apathy, then you’re setting yourself up for a broad spectrum of financial disasters,” she said.
She said being aware can go a long way when it comes to money. This applies to daily spending as well as which Kiwisaver you’re invested in.
“Be interested, be aware and care about your money and you’ll naturally attract and retain more of it.”
She said keeping up to date with your financial situation is also important.
“Review your finances on a regular basis, be aware of subscriptions that you no longer use and shop around for things like insurances. Prices change on a regular basis and you can save heaps by going to a competitor.”
Fear can be damaging and can undermine your hard work, Morrall said.
“So many people have a natural fear of money, which causes both short-term and long-term financial distress.”
However she said in this day and age, it’s easy to upskill when it comes to money.
“You don’t need to go back to school to get a degree in finance to build your confidence. Books, blogs, and podcasts and personal financial websites are prolific,” she said.
“The worst thing you can do if you have money problems, phobias or bad habits is to bury your head in the sand and pretend it’ll all go away. The journey of 1,000 miles begins with a single step.”
Morrall said debt can be incredibly stressful and can play a huge part in financial strife.
“Debt is the single biggest destroyer of wealth. It’s right up there with divorce. So long as you’re carrying debt, you’ll always feel like you’re on a treadmill and never getting ahead.”
The solution is pretty straightforward, she said. “If you have debt, pay it off as quickly as possible and don’t go back.”
“Consolidate your debt and switch to the lowest interest rate, pay it off before the interest kicks in and never go back.”
She said parents should teach their kids about the dangers of debt.
As if divorce wasn’t bad enough, now you have one more thing to worry about - money. Morrall said divorce can be extremely detrimental to wealth.
“No one wants to think about this when it’s all roses and champagne, but it’s a reality that affects close to half of all relationships.”
She said people need to plan for the worst-case scenario.
“Think about the unthinkable and then contemplate the consequences.”
“If you have assets at stake and you don’t want to lose them to a failed relationship, it may be worth thinking about a trust, if appropriate, or financial agreement upfront.”
She acknowledged that it’s hard to get everything right, but thinking long and hard about who you marry is important.
“Who you marry can have the greatest impact on your future.”
Morrall said giving in to the daily temptations of life can have an impact on your wallet.
“We live in a world full of material temptations and some very expensive ones too. Mobile phones, TVs, computers may serve a purpose but buying the latest, more expensive model may not be in the budget.”
She said thinking twice before buying anything, especially if it’s over $100, and making sure you can afford it is essential.
“Give yourself a 24-hour stand-down period to think before you buy. Quite often, you’ll find the consumer itch disappears overnight.”
Online shopping is another thing to watch out for, she said. “Abandon the shopping cart and turn off those annoying stalker ads on Facebook begging you to buy.”
“Track your expenses on a regular basis. It’s an illuminating exercise that will teach you how to become a money master.”