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Save Your Money to Wealth

by Sigrid de Kaste

Does Saving Bust Your Money Myths?

Making the most of your money often requires common sense more so than a commerce degree. Lets take a look at five misconceptions about money that may be holding you back from wealth

1. I don’t earn enough to Save

A lack of savings generally has less to do with how much you earn and much more with how much you spend. Cutting out even small discretionary spends can help you save

  • Take away coffee every day at work can save you around $820 a year
  • Buying lunch three days a week can save more than $1,000 a year
  • Tuckshop once a week for the kids can save more than $250 a year

We don’t save because often we think we need to have $50 or $100 at a time which is totally wrong

Start small…if you save $1 a day from age 18 to 65, with compound interest paid at 6% you would have $96,000. Make it $5 a day and you’ll achieve $480,000

Save your Way to Wealth

 

2. A Sale is a Chance to Save

A sale is actually a chance to shop and probably spend either more thatn you intend or more than you can afford

Of course you will spend less on an item if you wait for it to go on sale but the problem is, many of us discard our shopping list or exceed our budget when we are faced with a bargain. We focus on how much we could save, not how much we are about to spend

Big tip: keep focused on what it is you are looking for and do not get distracted by the sale signs

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3. My Home will Finance my Retirement

If you live in a multi million dollar home then you might be right. Many of us however could be struggling to even pay off our homes by retirement. There is a growing concern amongst financial experts that many boomers will be looking to their superannuation to pay off their mortgages

Instead of paying off the family home many Australians have been dipping into their home equity to fund their lifestyles with a view to using their super limp sums to clear the debt. That strategy is likely to push more seniors onto the age pension earlier

The best way to prepare for retirement is to put more into super and establish some long term investment goals to achieve wealth

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4. My Bank will only give me a Credit Card Limit I can Afford

When lenders assess how much credit cad debt you can handle they really are stretching things to the limit. They’re not considering your real life financial responsibilities. They are counting on you covering just the minimum repayment each month so you take as long as possible and pay as much interest into the banks’ coffers

Regardless of what a lender offers you in credit, you need to do the sums yourself. Start the habit of paying off your credit card every month

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5. I’m better off Renting and putting my Money into Shares

With house prices climbing beyond the grasp of many first time home buyers it’s not surprising some are tempted to give up their dream of property and invest in shares. Financially there may not be anything wrong with that strategy. Property and the share market are both long term investments to wealth

One advantage of home ownership, however, is that paying down a mortgage becomes a form of forced savings. Your property will grow in value over the long term. If you are renting you need to be fairly disciplined to regularly invest a portion of your income. This is where the best investors can come unstuck.

 

Everyone’s circumstances are different so make sure you get expert financial advice before deciding on which investment is best to wealth for you. Creating a habit to save although, is always useful!

 

 

 

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