Avoid these 8 common money mistakes (and what to do instead)

You might already know the ‘big’ financial mistakes to avoid—but what about those sneaky little ones? The small, everyday habits that don’t feel like a big deal at the time, quietly chipping away at your finances over the years, potentially costing you hundreds of dollars without you even noticing.

Some of the most common money mistakes we Aussies make are:

• Not knowing where our money goes,

• falling for lifestyle creep,

• carrying high-interest debt,

• not educating ourselves about money.

The good news? A few small tweaks to daily habits can make these money traps easy to avoid, helping you build better habits and feel more in control of your finances.

None of these are permanent problems—and we’ve got simple ways to help you tackle each one.

Mistake 1: Not knowing where your money goes

It’s difficult to nail down a savings goal if you don’t know where your money is going. Small purchases and regular bills can quietly add up, leaving you unsure how much you can really save.

How to fix it: Track your spending

• Use a budgeting app: Apps like Buddy, Goodbudget, or Raiz make it easy to set a budget and track your spending habits. Many let you sync your bank accounts and other financial products, so you can see everything in one place—your everyday transaction account may already have some of these features baked in!

• Categorise your money: I still use an old-fashioned Excel spreadsheet to keep track of my budget, with my income up the top followed by categories of weekly spending (i.e., rent, utility bills, transport, groceries and non-essential splurges). Assigning each dollar to a certain category shows you exactly where your money is going each week.

• Automate reminders: Many apps send alerts for bills and spending, helping you avoid overspending without thinking about it.

Mistake 2: Keeping your money idle in a low-interest account

For quite a long time, I was guilty of letting my savings sit idle, until I realised that if your money isn’t growing or gaining value through interest, it’s likely being eroded by inflation.

How to fix: Make your money work

• A high-interest savings account may help to increase the value of your money, usually at rates above inflation, but beware that some of the higher rates offered may only be introductory and/or require you to meet certain strict conditions.

• If you have a variable-rate home loan, you may already have an offset account, but are you fully utilising it? Money you put in your offset can lower the amount of interest you pay, although the tradeoff is you won’t earn interest on this money.

• If you already have a savings account, it’s worth seeing how it stacks up against the rest of the market, and if you could be earning interest at a more favourable rate.

Mistake 3: Ignoring your super or retirement fund

While retirement may seem far away, it’s important to make sure your super is working for you right now. Canstar Research found that an extra 0.56% in fees could cause an average super balance to be $136,900 lower at retirement. Similarly, a super fund with an average annual return of 8.7% yields $147,800 more at retirement than one with a return of 7.6%. Small differences can really matter!

How to fix: Take an active role in managing your super

• Check your super fund details: Log into your super account—it may have been a while. In your super fund’s portal you should be able to access your super statement, which outlines your fees —you may be paying for life insurance you didn’t even know about!

• Compare your super fund to others on the market: You can compare your super fund’s fees against others on the market using Canstar’s comparison tables. You can also see the one-year and five-year returns of these super fund products. The investment return for your current super fund may be outlined on your super statement, otherwise it may require some maths.

• Consider where your super is being invested: If retirement is still far away, investing your super in high-growth options may be appealing. On the other hand, if you’re nearing retirement, you might opt for a balanced or less risky investment option.

• Consolidate super funds: Consolidating your funds can help you avoid being hit with multiple sets of fees, and it can be done through ATO online services via myGov.

• Consider obtaining personal financial advice: A qualified financial planner or advisor could help answer your super questions—there may even be one available through your fund.

Mistake 4: Falling for lifestyle creep

Lifestyle creep happens when your salary increases, but it doesn’t feel like you have any more money, because you’re now feeling cashed up and spending more on non-essentials.

How to fix: Think about your needs and wants

I always try to remember that just because I can afford something, doesn’t necessarily mean I need it right now. One way to avoid lifestyle creep after a pay raise is to automate your accounts, moving the extra money from your everyday account to your savings, where you’ll be less tempted to touch it.

Mistake 5: Carrying high-interest debt

From home loans to credit cards and HELP, debt can be a fact of life, but at the same time, it’s important to manage your debt wisely so it doesn’t spiral.

How to fix: Pay down your debts where you can

• Avalanche approach: Try to pay off the debt with the highest interest rate first, while continuing to meet the minimum repayments of your other debts. Once this debt is paid off, move onto the next highest rate.

• Snowball approach: Try to pay off the debt with the smallest dollar amount first, while continuing to meet the minimum repayments of your other debts. Once this debt is paid off, move onto the next smallest debt.

• Streamline your finances: Refinancing a loan to a lower rate or combining multiple debts into one via a debt consolidation loan are both ways you could manage your repayments more efficiently.
  

Mistake 6: Not having an emergency fund

If an unexpected bill hits, an emergency fund can help cover the costs without taking out a loan or accumulating debt on a credit card.

How to fix: Build an emergency fund

The Federal Government’s Moneysmart website suggests putting three months worth of your monthly expenses aside to cover emergencies. With the cost of living being tight, you may find that you don’t have a lot of cash to put aside, but every bit can help.

To get the most out of your money, you could consider putting your emergency fund into a high interest savings account, preferably one that has a high ongoing interest rate. That way your emergency fund will be earning you interest at the same time just by sitting in the bank. Just check the T&Cs to make sure you meet the conditions to actually earn this rate, like minimum deposits.

Mistake 7: Mistiming the market

Last year saw Aussies lining up to buy gold at commodity exchanges as it surged in price, but if you jumped into the trend too late and bought at the top of the cycle, you may have seen a quick slide in value. This is an example of how fear of missing out (FOMO) and letting your emotions ride shotgun can hinder you.

How to fix: Learn more about investing

While learning to invest may take a bit of time and research, and require some professional financial advice, you may find it worth your time.

Personally, instead of chasing trends, I opt to invest in sectors that I think will do well over the long term. As the seasoned investor and chairperson of Berkshire Hathaway, Warren Buffett says “if you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

In other words, sticking to a long-term, consistent investment plan may prove more fruitful over time.

Mistake 8: Not educating yourself about money

Money affects most of the things we do in life, and those without financial literacy can fall victim to the above mistakes.

How to fix: Increase your financial literacy

You don’t need a degree in finance or economics to become financially literate. Just broadening your reading on financial topics, or even subscribing to a few finance podcasts, can help you level up your knowledge.

Financial success isn’t about being perfect. It’s about being aware of the pitfalls and adjusting your habits to help avoid them, as well as a bit of life admin.