We’ve supported over 4,000 Kiwi families and individuals in navigating their finances and growing their wealth. Over time, we’ve noticed several common mistakes our clients make. Here are the top five, along with some insights on how to avoid them
Trying to Time the Market
When it comes to investing, many individuals attempt to ‘time the market’, aiming to buy low and sell high. However, the financial markets are highly unpredictable and influenced by myriad factors.
The Risk: By attempting to time the market, individuals can often miss out on significant gains, or worse, sustain heavy losses.
The Solution: A better strategy is to adopt a long-term, disciplined approach to investing. Regular, consistent investment can help mitigate the risks of market volatility.
Being Too Conservative
While it’s essential to manage risk, being overly conservative can hinder financial growth.
The Risk: By avoiding all forms of risk, individuals may not be able to achieve the growth necessary to meet their financial goals, especially considering inflation and living cost increases.
The Solution: It’s essential to strike a balance. Diversifying your investments and periodically reviewing your risk tolerance can lead to a healthier financial future.
Helping Family in the Wrong Way
It’s natural to want to help family members financially, but it must be done correctly.
The Risk: Giving or loaning large amounts of money without proper planning can negatively impact your financial health and potentially strain relationships.
The Solution: Consider other ways to support loved ones, such as helping them develop a budget or connecting them with a financial advisor. If you do decide to provide financial assistance, make sure it aligns with your overall financial plan.
Not Diversifying
Having all your eggs in one basket is a risky approach when it comes to investing.
The Risk: If you invest heavily in a single asset, sector, or market, you could face significant losses if that area underperforms.
The Solution: Diversifying your portfolio across different asset classes, sectors, and geographical areas can help spread risk and potentially lead to more consistent returns over time.
Lifestyle Creep and Working Too Much
Increasing expenses as your income grows, known as ‘lifestyle creep’, and overworking can have serious financial and personal implications.
The Risk: You might find yourself in a cycle of working more to earn more, only to increase your expenses further. This cycle can lead to burnout and limit your ability to save for the future.
The Solution: Regularly reviewing and adjusting your budget to reflect your income, prioritising savings and investments, and maintaining a healthy work-life balance can help prevent lifestyle creep and overworking.
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