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Why you shouldn’t give in to the temptation of DIY finances.
Are you tempted to go at it alone with your money management? Have you googled how to DIY your finances and feel you’re ready to take on the challenge?
As financial advisers, we see many of the common mistakes people make when managing their own finances. That’s why we’ve compiled a quick guide to some of the biggest risks of DIY finances in Australia.
Want to avoid making these mistakes? Get in touch.
1. Rushed decisions
People often find it difficult to be objective when planning financially for the future. You may not have the time to thoroughly research your investment decisions, resulting in rushed choices that fail to take into account the latest trends and activity.
The temptation to spend your savings on luxuries, such as a brand new car or a dream holiday, can also be difficult to resist. But this impulsivity could have a significant impact on your financial future, especially if you’re approaching retirement.
2. Falling victim to inertia
On the flip side of the coin, failing to make a decision at all can be just as damaging to your DIY money management efforts.
Many people fear making the wrong choices, which can lead to missed opportunities and dwindling savings, as a combination of low interest rates and inflation eroding your wealth.
Eighty-six per cent of parents in Australia believe life cover is important, according to a recent Real Insurance Family Protection survey. However, one-third said they don’t have enough insurance to meet their needs.
Rice Warner Research from last year emphasised the country’s underinsurance problem. The company found that the median level of life coverage among Australians is only enough to meet 61 per cent of their basic requirements if it was needed.
Not purchasing enough life cover to protect you and your family’s future in the event of unforeseen circumstances can be one of the biggest risks with DIY finances in Australia.
Roy Morgan Research announced in September that the average net wealth of people intending to retire within the next 12 months was $281,000.
The Association of Superannuation Funds of Australia estimates that you will need a minimum of $545,000 to retire comfortably as an individual, or $640,000 as a couple. Clearly, the sums don’t add up for many Australians.
Planning a comprehensive strategy to achieve your dream retirement is a challenging undertaking, and underestimating your needs is a common mistake we see when people manage their own finances.
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
