Five common money mistakes

Dr Pushpa Wood says not enough people keep track of their spending.

As the director of the Westpac Massey Fin-Ed Centre, Dr Pushpa Wood has seen it all when it comes to bad money management. To mark Money Week 2015, she has compiled her list of the most common pitfalls to avoid.

1. Overestimating their ability to manage money

It never ceases to amaze me how overconfident some people can be when it comes to money management. They think they have control over their finances, but can’t answer these basic questions: “How much savings do you have right now?”; “What is your weekly/monthly budget for non-essential items?”; and “If anything were to happen to you tomorrow, will your family be able to manage financially?” Until these questions are answered, people really have no idea how healthy their finances are. 

2. Not keeping track of their money

It is easy to form a habit of buying a coffee in the morning or a couple of drinks a few times a week. Before you know it, these “few small items” mean your wallet is $30 to $50 lighter! Many people have no idea how much they spend on unplanned items. Keeping track of your money for a few weeks can provide a lot of insight into your spending habits. There are many online tools and phone apps available to help, so there really is no excuse. And if you are old fashioned like me, then a B5 notebook in your handbag is just as effective!

3. Justifying ‘wants’ as ‘needs’

I am always at a loss for words when I hear things like: “I really needed that nice pair of trousers or shoes”, or “I really need the iPhone 6+. Everyone else in my group has one.” The best excuse I heard recently was, “I need to keep myself equipped with all the latest technology so I can keep up with my friends overseas. That’s what credit cards are for, right?”

4. Making big money decisions without any research

I still regularly come across people who have sent money overseas after being targeted by scammers. They want to help someone in trouble, or to become rich quickly, or they might fall in love online and get duped into selling their assets and following their “true love” across the world. As the saying goes: “If it sounds too good to be true, it probably is!”

5. Ignoring the true cost of borrowing

Yes, it may sound like a fantastic deal when you can buy a large screen TV, interest-free for 15 months. How can you possibly not go for it – especially if you are a rugby fan? But in the excitement of watching the World Cup, people often forget to consider the tue cost of borrowing. Be mindful of extra costs like set-up fees, administration charges, insurance, late payment fees if it is not paid off within 15 months, and interest rates once you come off the interest-free period. Is the deal really that good?

Related articles

Young Kiwis lack skills in budgeting and saving
Even a ‘no frills’ retirement requires extra savings
Festival proves finance can be fun
Simplified money course key to empowerment

More related articles

Massey Contact Centre Mon - Fri 8:30am to 5:00pm 0800 MASSEY (+64 6 350 5701) TXT 5222 Web chat Staff Alumni News Māori @ Massey