Five money mistakes you need to stop making

Hannah McQueen is a financial advisor, chartered accountant, personal finance author and founder of – financial strategy and coaching.

OPINION: We all make mistakes with our finances, whether through inaction, inattention, inexperience, or simply bad luck.

Betting on the wrong horse or trusting the wrong person can cost you dearly, but so can many other less obvious, but still fundamental financial mistakes. Here are five to start with.

Financial procrastination

They say the best time to plant a tree was 20 years ago and the second best time is today, but often we still can’t find the motivation to do it now. Life gets in our way, we procrastinate, we find excuses.

With a million other immediate priorities, dealing with issues like retirement, wealth building, or even just coming up with a plan sits in the too-difficult basket for too long.

Time is one of your most valuable assets when trying to grow your wealth. The more time you have, the more options you have, the more risk you can tolerate, the less risk you need, and the more you can accomplish – so the “I’ll do it when I get there” mentality is a mistake.

There will always be an excuse not to act: bad timing, no time, no motivation, too much uncertainty. Maybe you’re comfortable enough to think you don’t need them, but freewheeling can have consequences – it’s just that you often don’t realize what they are until the opportunity to move forward has not passed you by.

We are all so busy living that we put off taking action to secure our financial future (file photo).


We are all so busy living that we put off taking action to secure our financial future (file photo).

Spending too much on your home

I say this tentatively in the face of extremely high property prices in New Zealand, but the fact remains that if your debt-to-equity ratio is too high, you will find it difficult to move forward. Also, if you have a change in circumstances, you are less likely to be financially resilient enough to recover.

I would consider a debt on your home that is seven or eight times your income (or more) to be too high, and a sign that we need to go back to the drawing board and do things differently.

This may mean that the debt you are carrying is unsustainable and you need to sell.

It may mean that your first step on the property ladder isn’t in your own home, which requires a mindset shift – but there’s a reason for it.

You don’t want to put yourself in an unsustainable position that hampers future financial progress and leaves no room to absorb a rise in interest rates or a change in income. And that’s before we can preserve the ability to repay faster, prepare for retirement, make other investments, or simply live life on your terms.

If your home's debt-to-income ratio is too high, you'll have a hard time moving forward.

Kathryn George / Stuff

If your home’s debt-to-income ratio is too high, you’ll have a hard time moving forward.

Do not create financially independent children

One of the biggest obstacles to the retirement plans of many of my clients is their “kidults”: adult children who have failed to soar or break free from their parents’ purse strings.

I completely understand wanting to help your children, but not preparing them to become financially independent is a mistake, as is bailing them out over and over again at the expense of your retirement.

I think being able to help your kids succeed is hugely rewarding and I’m a huge advocate for wealth planning and building to enable that. But the goal is to make it easier for them, not to make it easy.

This must be accompanied by teaching them how to fend for themselves, earn their own money, manage that money, and develop a mindset that will see them thrive.

Hannah McQueen:


Hannah McQueen: “While you can’t control the markets, you can control your decisions and your actions – or your inaction.”

Overlooking the power of your own behavior

It is far more exciting to look for investment opportunities elsewhere than to look within for ways to do things smarter. I understand. Often we don’t want to recognize that our biggest problem might be ourselves.

But while you can’t control the markets, you can control your decisions and your actions – or your inaction. It may be less sexy, but if you can optimize your financial management first, it provides fuel for your financial plan.

It’s one of the keys to growing wealth, so it’s a mistake not to look in the mirror and consider why we do the things we do and what we can do to change the results.

Recognize that if you’ve never done it before, or your natural tendencies are against you, it’s still going to be tough, so outsource and automate what you can to increase the likelihood that you’ll stay the course.

Take advice from the Joneses

We know we shouldn’t, but we’re all guilty of sometimes looking over the fence and comparing our friend or neighbor’s situation to our own. Wondering how they can afford that car, that vacation, or that tuition.

But as on social media, the shiny exterior often does not correspond to reality. Get under the hood and you might find that the Joneses are paddling hard just to stay afloat. This is just one reason to be wary of unsolicited advice around the barbecue at gatherings.

I’ve had clients who suddenly got nervous about their financial plan because Harry next door didn’t think what they were planning was a good idea. There’s a reason advisors are qualified, licensed and regulated – it’s so that financial advice isn’t given by just any Tom, Dick or Harry.

Making big financial decisions based on the superficial calculations of Harry, who doesn’t know the details of your situation or the modeling behind your decisions, would be a mistake. Tell him to focus on not burning the sausages instead.