I’ve been asking experts recently about the biggest mistakes women generally make when it comes to managing their finances. I was expecting a laundry list of errors, so I was pleasantly surprised when my friendly experts put forward just two. I say pleasantly surprised, because how hard can it be to rectify two mistakes?
Furthermore, the mistakes don’t even require complex remedies. By the end of the conversations I was feeling even more encouraged.
So, what are the big blunders? The first is the failure of women to take an interest in their finances. The second is their failure to take advantage of the small things that can save money and improve household budgets and savings.
1. Not being engaged enough
Failing to take an interest in their finances is more widespread among women in their 50s, 60s and 70s, but even younger women all too often don’t take sufficient notice of their finances. It might be 2016, but there is still a tendency for women to outsource the household budget to their partners, or to bury their heads in the sand.
Living day-to-day, with little thought of what sort of future they want, is a common recipe for a crisis of confidence – or cash – down the track.
Women should know the following about their finances.
- income is coming into the house?
- is being used to fund day-to-day living?
- is being used to pay down the mortgage?
- is left on the mortgage?
- life insurance do they and their partner have?
- does the household have in retirement savings and other investments?
Engagement is important for two main reasons: you need to be confident that you and your family are on the right financial track and will be able to meet future spending needs, and if anything happens to your partner, you will need to be in a position where you can take over the reins fully.
“What will you do if something happens, like a death or divorce? Not understanding the family finances can make women very vulnerable at an emotional time,” says Graeme Yukich, executive chairman of Entrust Private Wealth Management.
The solution? Understand your finances. Start asking questions about the household balance sheet and don’t be afraid to admit if you don’t understand a concept.
You could also ask a trusted friend or family member who is further along the path what approach they take to issues such as their household budget, savings, insurances, superannuation and the like. You may well discover that paying for some professional advice is money well spent.
2. Not taking advantage of small things
Failing to take advantage of the little things that can save you money is the second biggest mistake. And we all know that those little things can quickly add up to make a big difference.
So many people, for example, don’t bother with an offset account on their mortgage, which can save tens of thousands of dollars over the life of the home loan.
Too many women make the following mistakes:
- have cash lying around in the bank earning minimal interest
- have debts on credit cards which charge exorbitant interest rates
- don’t have the best value mobile phone plans for their needs
- aren’t making sufficient use of super tax concessions.
So, take a moment to look at the little stuff. Go through your outgoings, including bills, and see if there is a way you can save money. Check that your super is held efficiently and find out how much interest you are getting from any bank savings.
Make a checklist and go through it systematically. It doesn't matter if it takes six months – or more – to get through it.
Case study: Kristianna’s unconventional choice
Dropping out of university to take up hairdressing should have been the biggest money mistake Kristianna Michaelides (pictured) ever made.
Twenty years later she can safely say it has proven quite the opposite.
Skill, enthusiasm and being in the right place at the right time – at least a couple of times – have translated into a flexible, sustainable career. Winning some national hairdressing awards and being employed by a haircare company have translated into lucrative bonuses.
“I may not be on the high-end of the income bracket but I have real stability, particularly since I’ve become my own boss,” says the 39-year-old.
“My parents were most worried when I left uni but they’ve noticed over the years that there’s less job volatility in my industry compared to my sister’s, who’s a white-collar worker.”
Michaelides was studying a business-management degree when she had a “light-bulb moment” while having her hair done at her local salon in Townsville.
“I thought, ‘this is what I need to be doing’. I was good at working with my hands. And I was 100 per cent right.”
She learnt her trade from a “beautiful, old-fashioned cutter” and then when he retired moved to the “cool” salon of Townsville.
“Hairdressing’s not a business to make money,” she says. “It’s a terrible paying job, to be honest, and money didn’t really come into it until I had a national presence and became an educator.”
Her breakthrough came when some prominent Australian hairdressers noticed the killer jumpsuit she was wearing at a 70s-themed hairdressing conference in Brisbane and suggested she drop by should she ever be in town again.
She did drop by, and her boldness led to high-profile work with the then fledgling Fashion Week Australia.
“A whole other world of competitions and things I hadn’t had a clue about opened up and then I won,” Michaelides says.
She went to work for the “guy of the moment”, Brad Ngata in Sydney, worked in London as an educator for KMS haircare, and, with an impressive portfolio, took a job at a leading salon in Melbourne’s South Yarra.
“My wage was still terrible,” she says. “I was still earning award wages even when I’d won national awards. But I got to negotiate.”
Today, with a young daughter and fitness-trainer husband to consider, she works three (long) days a week for herself out of a St Kilda Road salon.
“The best thing is I'm still joyous about my work.”
Case study: Natasha Hughes