Retirement Income

4 tips that could save you thousands

4 tips that could save you thousands

When it comes to our finances, there are plenty of monetary pitfalls that can have costly consequences.

Here are four financial tips that could save you thousands of dollars in the long run.

1. Choose who you take advice from

Though looking to family and friends for advice can be helpful in other circumstances, you can run into problems when it comes to money advice.

“Unless your loved one is qualified and an expert in this field, they are unlikely to know everything there is to know,” says Helen Baker, a financial advisor, author and public speaker. “Those who speak from their own experience are not aware of the details that make everyone’s situation different.”

Being more picky about where and who you take financial advice from is the best way to go, according to Baker.

“Make sure they are licensed to practice and have a good reputation,” she says. “Beware of vested interests pushing you a certain way. Consider professional advice only on matters they are qualified to discuss: accountants aren’t licensed to give financial advice, and financial advisors are limited with their tax advice.”

2. Be smart about your super accounts

While most advice tells us to roll all our superannuation accounts into one to save money, it might not be so simple

“If you consolidate low-fee super accounts into a high-fee one, you’re actually losing money,” Baker explains. “Low cost funds don’t necessarily offer the same investments found in other funds.”

Claims that having two funds will mean you pay double the fees aren’t necessarily true either.

“Fees are generally calculated as a percentage of your super, so one percent of, say, $200,000 is the same as one percent of two $100,000 balances.” she says.

Instead, the biggest super mistake relates to life insurance.

“Life, disability, and income protection insurances can all be paid out of your super,” Baker says. “If you close an account, the policies attached to that account in almost all cases are terminated. Policies also differ between providers - you’re unlikely to get exactly the same policy in each one.

“Many people only discover their mistake when they need to make a claim but are no longer covered.”

3. Put away the crystal ball

With the unpredictable nature of life, Baker says calculators meant to determine how much super you will need for retirement should be treated with caution.

“How is that calculated? How can it factor in things such as future tax rule changes, Centrelink changes, spontaneous withdrawals, changes in employment or market fluctuations? They can provide false hope that you have enough so you needn’t do anything, or scare you into taking unnecessary risks.”

4. Get involved

For couples, the common pattern of one partner leaving financial matters to the other and not getting involved can be detrimental.

Baker says this can become an especially thorny issue following divorce or death.

“Nobody gets married expecting to divorce or be widowed early,” she says. “But sadly, this can and does happen. If your partner dies suddenly or becomes your ex, it’s difficult to unpick where the funds have gone if you weren’t involved - especially at a time when you’re grieving and becoming accustomed to living on your own.”