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Money mistakes at any age

Financial literacy is the art of understanding how money works in society and how to manage it successfully. This isn’t an inherent life skill – we have to learn how to do it. Getting better at managing money will help you at every stage of life, and the earlier you recognise common money mistakes and learn how to avoid them, the better off you’ll be.

Some common money mistakes aren’t particularly age-specific, but others are more prevalent within specific age groups. Here are the most common money mistakes made during different stages of life.

In your 20s

No emergency fund or savings

Many 20-somethings don’t view saving money as a priority. This age group is generally still finding its way in the workforce and learning about the costs of living. They don’t usually have a lot of disposable income to put away after basic living expenses, and any extra often goes toward socialising. But this is the time to get into the habit of putting aside part of each pay for emergencies.

Not creating (or sticking to) a budget

The first rule of money management is to know exactly how much you’re spending, and what you’re spending it on. Young people can sometimes have a blasé approach to budgeting and a “let tomorrow take care of itself” attitude. It’s not difficult to keep track of all your expenditures, however, and by doing so you’ll be able to work out which areas you may be able to save in. When shopping, simple tricks like taking advantage of discount codes or sale items can help save you hundreds, if not thousands in the long term. Sticking to a budget takes discipline, but it’s a fine way to start expanding your disposable income. Spending less is often easier than earning more.

Spending more than you earn

The rest of the world may seem bent on overusing credit cards for major purchases like holidays or cars. But that doesn’t mean you have to board the debt train as well. Credit card debt in Australia currently totals around $50 billion1 – a staggering amount. Using your credit card isn’t a problem – it’s when you can’t pay the bills promptly that a debt spiral can happen. If you can’t pay your credit card bill in full the same day it arrives in the mail (or at least by the end of the month), you shouldn’t have made those purchases.

In your 30s

Ignoring your Will and not appointing a Power of Attorney

In your 30s, you’ll have accumulated some personal wealth and responsibilities. This is an excellent time to look at making a Will. This will ensure your assets go to your loved ones (and/or specified charities) if you die. Appointing a Power of Attorney is crucial so you have someone to make financial and property decisions on your behalf if you’re ever incapable of doing so yourself.

Delaying the purchase of life insurance

Life insurance rates are tied directly to your general health, so it’s often better to apply when you’re “in your prime” physically. By now you may have a mortgage, a growing family and other major financial responsibilities, so being adequately covered is super-important. Cover you could consider includes Death Benefit, plus additional cover for TPD (Total & Permanent Disability), Trauma Cover and Income Protection.

Getting married before discussing finances

Everyone has a different “money philosophy”, so finding out about your future spouse’s approach to money is essential. Before you tie the knot, discuss how you both feel about debt, spending priorities, savings and your long-term financial goals. Marriage is a legal contract that has financial implications for both parties. Have your money conversations early – to avoid heartache later on.

Buying a home you can’t afford

When it comes to house buying, trying to keep up with the Joneses is never a good idea (and here’s a little secret: the Joneses are probably in debt up to their eyeballs). When you’re house-hunting – especially if it’s your first home – keep your expectations realistic. Buy a house that matches your budget, not one that feeds your fantasies.

In your 40s

Not reviewing your mortgage regularly


Once you’re in your 40s, you’re probably in ‘automatic mode’ when it comes to paying your home loan bill. You pay it without thinking about it. But you shouldn’t blindly pay your mortgage without reviewing it occasionally. When interest rates change, this affects how competitive your present deal is. It’s a good idea to scrutinise your mortgage at least once a year to see if better deals are available.

Having lingering credit card debt

Credit cards have their good points – they’re convenient, let you accumulate reward points and may even come with built-in travel insurance. But they’re not a substitute for common sense. An endless downward spiral of credit card debt can be crippling. Avoiding this catastrophe is a matter of developing good habits. Use your credit card only for small purchases – not to spend up big with money you don’t have.

Not checking your super

There are some good reasons to periodically check on the state of your superannuation fund. The first is to ensure your current employer is making their legally obligated contributions on your behalf. Secondly, when you’re approaching middle age, it’s wise to be thinking about how much super you’ll need to comfortably retire on. Consider ‘salary sacrificing’ or other possibilities to top up your retirement nest egg.

Failing to explore investment ideas so your money works harder

Hopefully, by the time you’re in your 40s, you’ve managed to put away some savings. If you just leave that extra cash in a normal savings account, however, inflation, tax and those pesky bank fees can see your money shrink rather than grow. An option to consider is to invest. Investment isn’t just for the wealthy: you can invest $1000 if that’s all the money you have to spare. Talk to an investment expert about how to put your money to work.

In your 50s

Underestimating health care costs

Australians in their 50s visit their GPs and are admitted to hospital more often than those in their 40s2. After you reach the half-century mark, health care expenses start to take on a new importance. However, many people aren’t fully aware of what is and isn’t covered by Medicare or their private health insurance – and sometimes the resulting gap can leave them out of pocket far more than anticipated. When it comes to private health cover, always fully understand what’s covered and be aware of the limitations and exclusions that apply.

Not understanding how much money you’ll need to retire

One thing’s for sure: whatever your age, you are slowly inching closer to retirement. But given the current cost of living (and projected costs for the future), how accurately have you calculated how much you’ll need to retire? Don’t leave working this out until it’s too late. It’s easy to find online retirement calculators to give you an idea if you need financial advice to help you plan your retirement sensibly.

Failing to maximise super contributions where possible

As you approach the tail end of your working life, topping up your super can be beneficial. If you haven’t already, it may be worth visiting a financial expert to discuss the steps you can take to ensure your super is on track to adequately fund your retirement. You’re turning into the home stretch now, and you’ll want to have your financial situation under control for retirement.

In your 60s

Handling the empty nest syndrome

It’s a strange feeling: your grown children are off living their own lives, the house is quiet, life has smoothed out around the edges and you may have a fair bit of extra cash you don’t quite know what to do with. Rather than focusing on retirement, it can be all too easy to “go a bit crazy” and start spending your nest egg too quickly. Sure, you deserve some fun, but this is the time to look ahead to your future financial needs, not make drastic and expensive upgrades to your lifestyle.

Not having a “transition to retirement” plan

Retirement is a huge adjustment – and some handle it better than others. Retirement increases your risk of depression by 40%, and can exacerbate some other health risks too. The key to a happy retirement is to plan ahead before you get there. Staying social and active is vital.

Anticipate that women usually live longer

Australia boasts high life expectancy rates: currently 79.9 years for men and 84.3 years for women3. As we age, we need to be aware that women live longer on average. Regardless of who in a partnership dies first, it’s important that adequate financial steps are taken to ensure the support of the surviving partner throughout their remaining years.


1 http://www.australiandebtclock.com.au/
2 http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features20Mar+2011
3 http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4125.0main+features3110Feb%202014

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