Updated: Mar 6
Clients come to us with a breadth of problems, obstacles, needs and goals. Despite the clients - and their financial situations - all being so different, they often share one common trait. Indeed, it is a mistake we see time and time again in the financial world, and it can be the difference between falling or flying.
…The lack of strategy.
No financial strategy compromises long-term stability or success
That’s right, short-term thinking and short-term decisions can create long-term, sizable problems.
Let’s consider a familiar scenario for many of us; property mortgages. Here in Australia, we are culturally conditioned to think that home ownership is some kind of right of passage and badge of merit. Once we own our home, we’ve arrived. As a result, many fall into the trap of wanting to pay their mortgage as soon as possible. There is a belief that if they do this, they are freed up financially and can enjoy life. Alas, it is very rarely that clear-cut. In fact, when paying off a mortgage, it is often advantageous to be more tortoise than hare. Even paying off a mortgage fast takes time, doesn’t it? A decade is probably reasonably ambitious. That’s a decade of paycheques that have gone mainly towards your home. Yet once you have paid it all off, how many more decades remain to earn the maximum wage possible? Not that many, perhaps…
Instead, it might be more advantageous to spread those paycheques out some more. Indeed, if you pay less over a longer-term, your incremental savings might go towards other investments. This helps remove all your eggs from the one basket and to diversify your wealth. As a result, as your capacity to earn a top salary begins to decline, you can lean on other passive incomes you’ve been creating whilst paying off your mortgage. This is so often a winning strategy and just requires looking at things without those Australian-rose-coloured-home-buying glasses on! If this has you thinking, then why not read more about paying off a mortgage versus investing.
How can we help you create a financial strategy that is right for you?
The above example may or may not be right for you. But with ActOn Wealth, we find out for sure. We sit down to learn about your plans, goals, current situation, risk adversity levels and more. From this, we build out a clear strategy advising how to structure your finances and what you should ideally be doing with your money. The level of confidence, certainty and clarity this offers clients can never be underestimated. It is essentially a roadmap to a better financial future, and don’t we all want that assurance in life?
How can you avoid this financial mistake?
There are some practices you can put into place immediately to help avoid this financial mistake and deliver some quick, easy wins. They include:
Stick to your financial plan
It’s easy - just stick to the plan. Don’t get led astray by friends, family members, work colleagues, e.t.c. Everyone is living their own situation with their own biases and what is good for the goose is not necessarily good for the gander!
Avoid credit card debt
Another very effective way to avoid this financial mistake is to steer well clear of credit card debt, a slippery slope that has the potential to create some very scary scenarios.
Don’t spend big on depreciating assets
Ideally, you want to avoid paying significant amounts of money on depreciating assets such as cars. It’s just throwing money down the drain in most instances!
Take out risk protection
That money you just saved on the car, why not invest it instead into risk protection? The earlier you do this in life when your health is typically optimal, the lower the ongoing costs. And it is there for good reason - if you do encounter a health scare, then the money is available to see you through it. That’s one big worry off your plate (and no dint made on those investments).
Contact us to plan your financial strategy
Building out a financial strategy can be a really positive and empowering experience. Don’t be overwhelmed by the thought. We have all the tools, processes and knowledge needed to make this straightforward and, dare we say it, even simple! Let’s make sure this is one financial mistake you avoid.