If you could go back in time, what would you do?

Shares the five big­gest money mis­takes

CityPress - - Business -

Last week on Twit­ter I posted the three big­gest fi­nan­cial mis­takes my hus­band and I have made. Those er­rors that had long-term reper­cus­sions and which I wish we could go back and change. I asked what mis­takes fol­low­ers had made and what they wish they had done dif­fer­ently.

Many of them were very sim­i­lar to the er­rors we had made: Cash­ing in a pen­sion fund to buy a side busi­ness, overex­tend­ing on a home and us­ing our over­draft fa­cil­ity rather than cut­ting our life­style.

Learn from our mis­takes rather than mak­ing your own.

Be­ware of debt: Debt came up as a big money killer for most of the Twit­ter re­sponses.

● “Stay away from per­sonal loans, rather save for goals. Over five years I paid three years on cap­i­tal and then two years to the bank.”

● “Should have bought less ex­pen­sive cars.” .“Car debt, credit card and per­sonal loans taken for fam­ily emer­gen­cies.”

● “Cloth­ing ac­counts are dif­fi­cult to get out.”

● “Never take out a re­volv­ing credit loan. You will re­volve in it for­ever.”

● “Credit cards were mon­sters for me.”

We learnt first hand the mis­take of us­ing an over­draft fa­cil­ity. It is way too easy to swipe your card and use the bank’s very ex­pen­sive money rather than your own. Credit cards, store cards and over­drafts make the bank richer and you poorer.

Cars de­stroy wealth:

wealth de­stroyer.

● “The lure of bling. Buy­ing a rea­son­ably priced car for 15 years and in­vest­ing the ex­tra cash in the mar­ket trumps get­ting a fancy new car every cou­ple of years and re­main­ing in debt.”

● “I should have had a 10% de­posit when buy­ing a car and ne­go­ti­ated bet­ter with the dealer. Read the con­tract.”

We were for­tu­nate the first time we tried to buy a car the bank turned us down. This was be­fore the in­crease in credit ex­ten­sion and banks were far more cau­tious. I was so an­gry at the time, but it was the best thing that could have hap­pened. Now we only buy sec­ond-hand cars with cash – no fi­nanc­ing. Buy a car that gets you from A to B.

Save from the be­gin­ning: Lack of sav­ing or cash­ing in pen­sions is a lost op­por­tu­nity.

● “Not in­vest­ing from my first pay­cheque. And then in­vest­ing in en­dow­ments and a re­tire­ment an­nu­ity with +4% fees. Changed RA providers and now in­vest in ETFs.”

● “My mis­take was cash­ing in a pen­sion to put a de­posit on a house.”

● “Wish I knew ear­lier that every R300 I spend to­day could have been worth R1 a month for the rest of my life if I in­vested it. Also tak­ing too long to fig­ure out the dif­fer­ence be­tween spec­u­la­tion and in­vest­ment.”

When I changed jobs in my early thir­ties I made the clas­sic mis­take of cash­ing in my pen­sion. I used it to buy a fran­chise as a side busi­ness. Maybe if the busi­ness had been a suc­cess I would have a dif­fer­ent view of the de­ci­sion, but the re­al­ity is that I used re­tire­ment sav­ings for a a high-risk in­vest­ment. That de­ci­sion will cost me around R5 000 a month in re­tire­ment in­come. When you cash in your pen­sion, even if it is for a de­posit on a home, you take away re­tire­ment in­come.

Houses cost money: Un­der­stand the costs of home own­er­ship.

● “Would have waited longer be­fore buy­ing our first house and fig­ured out where our fam­ily want to be.”

● “Buy­ing is ex­pen­sive, lots of up­front costs and sell­ing is ex­pen­sive.”

Our mis­take was sell­ing our smaller but suf­fi­cient home for a big fix-a-up­per which we be­lieved would give our chil­dren a won­der­ful up­bring­ing. All it did was bring stress and debt. When buy­ing a home, do not un­der­es­ti­mate the run­ning costs.

Watch day to day spend­ing: Money we waste with­out re­al­is­ing.

● “Should have cooked more at home to save money.”

● “My mis­take was buy­ing a pair of over­priced Adi­das.”

● “Think­ing it’s nor­mal to have an ex­pen­sive cell con­tract and up­grad­ing every two years. That was re­ally stupid.”

There are so many money de­ci­sions we make every day that over time add up to be wealth de­stroy­ers. The oc­ca­sional splurge is fine, as long as it stays oc­ca­sional and is never done with credit. The key to find­ing a bal­ance be­tween liv­ing to­day and grow­ing wealth for the fu­ture is hav­ing a sav­ings plan up­front so your money pays you first be­fore it goes to day-to-day spend­ing. Re­view your cur­rent spend­ing habits or con­tracts and see where you can cut down with­out feel­ing as if you are sac­ri­fic­ing your life­style. Fi­nanc­ing de­pre­ci­at­ing as­sets is a

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