Men are typically are accustomed to accepting responsibility for their career, family wealth and financial wellbeing,
But many men make common mistakes with money that can put them way behind.
The mistakes are simple and quick to fix - but they do require engagement with your money. After all, it's your money - you've put in the time, added the value at work or the office, and now it's time to have that cash work for you and make you some consistent returns.
Let's have a look at what some of the common mistakes we make with our money and how to correct them. Some mistakes may be familiar to you, while others you may have already overcome.
Remember - mistakes happen. I've made plenty! And my learning is not over...I'll have to keep learning over my career and life.
If you recognise any of the below mistakes...accept them, forgive yourself, and give yourself the opportunity to secure a better future for your family and yourself.
Money Mistakes Men Make
1) We overcomplicate and trade
Our genetic make up can lead men to to take more risks and overcomplicate money management and investing. Our egos tell us we are smarter than the financial markets. Seeking big, quick profits brings major risks.
I had an experience where I lost my first property deposit by going to a seminar, getting suckered into a foolproof ‘trading system’ which promptly lost my money within a few short months.
Having learnt my lesson very painfully, I now stick to bigger, blue chip companies for my share investing, running a marathon and not a sprint.
Remember, you are not a hedge fund manager, a property shark or a budding Martin Place tycoon.
Keep it simple:
- Create a consistent income surplus
- Save 3 months expenses
- And then start investing (not trading) the rest.
Save yourself major pain - no trading, no seminars, no self declared, non-licensed money gurus. As billionaire investor Warren Buffet says there are two rules in investing.
Warren Buffet's Two Rules:
- Rule One: Never lose money
- Rule Two: Never Forget Rule #1!!
2) We Procrastinate in Buying A Property
Naysayers will always say a crash will come.
However, most property owners do very well in the long term. There's a saying - “Don't wait to buy real estate, buy real estate and wait”.
Remember, buy in solid, not speculative, areas. Your family home is a CGT (capital gains tax) free asset - meaning it is protected from taxation if you sell and realise a profit. That's a huge tax loophole to take advantage of.
Engage an accredited mortgage broker to help you get started or to review your home loans regularly (every 2 years), and to review the value of your property assets.
3) We fail to make a budget and use it for our bigger goals
Very often we hate budgeting, but we may desire an elusive sense of future financial security, or the financial freedom to quit the day job, without knowing a concrete ‘how much do I need?’.
Budgeting can help you achieve your ideal financial situation and give you a powerful goal.
How? By working out your annual expenses, you can set a goal to create an investment portfolio that will pay some or all of your annual expenses via the income returns in the portfolio (usually income via the a share dividend payments) . This is starting with the end in mind, by knowing your number and working backwards from that.
For example, a $500,000 diversified portfolio earning 10% will be able to pay you $50,000 per annum in income, while the $500,000 capital continues to grow. My personal marker is an $800,000 portfolio.
The lesson here?
Financial freedom can be methodically worked towards and often you can do it for less than a million.
Don't want financial freedom earlier than retirement at 67-70 years of age? No worries. See the Super tips below.
4) We fail to engage with Superannuation
Too many men ignore their super - to their long term detriment. However, getting engaged with your super is a big win, because after the family home, a persons super account is often their next biggest asset.
As a minimum, you need to know the following about your super: who it is with, what investment type it is invested in, how much insurance you have in super, and what fees you are being charged (anymore than 1.20% and you can do much better). If you have less than $200,000 in super, it is vital that you consider joining an industry super fund.
Australian Super is the biggest and is very reputable. Because they are the biggest, they often have the best value investments, insurance and administration. (Disclosure: this is who is use personally, because I rate them highly. If a better option comes along, I will switch).
Industry super funds are are typically the best funds (net of fees) out there, and fees can really eat into your net performance. High fee funds literally prey on your ignorance and inaction.
Don't be a sucker - unhook yourself from high fee super accounts and typically savings can easily total $2000 per annum.
Over 25-30 years this boost can add up to $200-300k. Boost your super and reduce your tax further by salary sacrificing $50 per week into super.
Your future self will thank you - loads.
5) We neglect insurance and leave our loved ones vulnerable
Many men can feel ‘invincible’ and that no accident could possibly happen to them. Insurance is like a bet you hope you lose.
Growing up I had the experience of one day having a successful entrepreneur father, and then the next day hearing he had been nearly killed in a car accident. His busy printing business folded without him at the helm.
Now, our families main breadwinner was now severely disabled and, as my father wasn't privately insured, we had to instead rely on the public disability insurance scheme. As you can imagine, this was not a recipe for great financial outcomes.
Don't let that happen to your family. Each Aussie father needs about $600k-1m plus in life insurance and enough to cover all mortgages and debts and provide for your family and yourself should you ‘win the bet’ and suffer a catastrophe.
General tip: Buy life and TPD insurance in your super fund, and buy income protection insurance outside of super for maximum tax deductibility and efficiency. Get an independent financial planner if you are uncertain about these terms.
6) We procrastinate on the big wins and focus on minutiae
It's always going to be easier to go have a coffee, surf Facebook, and watch the game than dedicate regular time to financial matters.
However, when you are 60, you won't remember that coffee or youtube clip, or the round of drinks at that bar. You will, however, be affected by your financial position.
Minimise those regrets and do your future self (and family) a favour by acting on financial matters this article bring up for you.
Once you have acted on the above, give yourself a pat on the back for taking care of your financial matters!
For further reading, Get A Financial Grip by Pete Wargent or The Barefoot Investor by Scott Pape are excellent Australian specific reads and expands further on the above topics.
HOW WE SUPPORT CLIENTS
At Profy Finance and Wealth, we have supported business and clients who are looking to finance property, investments, homes, vehicles and businesses, through:
- Arranging fully approved finance and lending at Australia's best providers
- Providing pre-approval reports with your buying power, including any LVR and LMI considerations
- Arranging valuation reports to guide you on your homes value and offer prices (if buying)
- Calculating and recommending finance options
- Arranging value add services such as building and contents insurance, depreciation reports, and legal conveyancing at preferred prices.
At Profy Finance and Wealth, we get more holistic results for our clients. Learn more about how we could help...