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Mid-Life financial mistakes to avoid

In a recent article, Prudential sets out eight financial mistakes to avoid in your 40s.  Being aware of these snares and pitfalls will assist in paving a much smoother journey into retirement:

Overspending – Enjoy life, but don’t fall for instant gratification!  Unnecessary expenses are tempting but your money could be better spent on appreciating assets, like an improvement that increases the value of your home or, boosting your investment portfolio.

Being too conservative in your investments – As we get older, we tend to take fewer risks, which also applies to our finances as we try to avoid losses. But, with an investment horizon still a long way off (+30 years) it’s important to have riskier investments that should provide greater long-term growth to build savings to meet your retirement goals.

Treating your bond as an ATM – Your home-loan may have a built-in temptation in the way of an access bond. This may seem a cheap form of credit, but when adding up interest and hidden costs, this is an expensive avenue to finance your lifestyle.

Panicking – Don’t panic at the first sign of trouble in the market. First speak to your financial advisor to gain some perspective on the risks you confront. Check whether your investment strategy is still appropriate to meet your goals. Selling when prices are down locks in losses that are likely to be recouped when markets recover.

Neglecting your financial plan – In your 40s and 50s, your goals may still be changing so an annual review of your financial plan is important to ensure alignment of goals and the right investment strategy. Click here to see Investonline’s financial planning tool.

Ensure you have an estate plan – You are never too young to have your estate in order. Draft a Will and confirm a power of attorney, which gives comfort that your dependants are taken care of and that someone you trust is empowered to make financial and medical decisions on your behalf.

Prioritising children’s education over retirement – Sure we want the best for our kids, but don’t neglect your retirement savings, as this should be your priority.

Not diversifying – Don’t have all your eggs in one basket. Spread your asset allocation, which will generate a more consistent return and should avoid anxious volatility and a temptation to make irrational decisions.

Click here to see our financial planning process and online tool.

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