Six financial moves you should avoid at all costs
So often I talk to clients about the plan for their finances. My aim is to paint a lovely road on which to follow and become financially sorted, with a sweet lifestyle to match.
There are a few things however that may come up, that you should avoid doing if you can help it. In the long run all of these things can and probably will bite you fair on the bum.
Co-signing a loan (going guarantor) – I get that sometimes this is going to come up and for some family members, you may decide it is worth it but consigning a big loan that you fundamentally have no control over but are liable to pay is not a good idea.
Usually if you are being asked to go guarantor for someone it is because this person doesn’t have a sound financial situation to start with. Realistically they should wait a bit longer and save a bit more, it shouldn’t be your problem.
Consider whether you want to lease your car – In some cases, car leases can work out more expensive than if you bought the car outright. Make sure you do the figures on the lease and then what it would cost if you actually bought the car yourself. Include petrol, services etc to give a full view of the outcome, and the tax advantages and disadvantages of each option. For most people unless you are travelling tens of thousands of kms, a car lease will not work out better for you.
Skipping out on insurance – I talk about insurance often, because I 100% believe in it. Do you have a house? Insure it. Do you have a car? Insure it. Do you have an income? Insure it. Yes it costs money to protect these things but with recent Brisbane unpredictable weather we have personally had to claim on home insurance. I also have car insurance in case something bad happens and income protection insurance in case I become too ill to work. Why? So that my life doesn’t fall in a heap at the first sign of adversity.
Buying time share – I have been to Hawaii a couple of times now, I love the place. I feel like it is one of those places I will go back to time and again and still be able to go somewhere different. One thing that happens in Waikiki specifically however, is the inundation of timeshare salesmen. They prey on the fact that you are enjoying an amazing holiday and ‘wouldn’t it be nice to have this more often’ vibe. They get you into a free breakfast with no pressure but I have definitely seen them work their magic. I can tell you now, timeshare is not a great investment. If someone is trying to sell you an investment on the street corner, maybe think again. (that could be my new business tag line?)
Jumping in and out of the market – Most people understand that in order to make long term gains in your investment portfolio, you need to think of investing as a long term strategy. There are a few cowboys out there who like the idea of ‘day trading’ or constant buying and selling. Unless you are a professional investment manager who does this for a living, buying and selling investments quickly is not really the best thing to be doing. You need to take into account the buying and selling fees (there will always be these) as well as the tax payable. For example, if you have bought and sold an asset for a profit within 1 year, you will not get a CGT discount.
Holding credit card debt – I like credit cards as a transactional tool, they make my life easy but that is all they are. I come across many people who just consider it normal to have a credit card debt and pay the minimum monthly payments. They tend to keep it maxed out. This is just consumer debt. That amazing pair of shoes you got on sale for $50, will end up costing you $150.
Are you guilty of any of these? I’d love to hear about it and how you overcame it.
The post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.