Trap 1 – Save by spending only small amounts

Symptoms: You don’t waste funds on big expenses. You reward your thriftiness with little treats like take-away coffees and a dinner out.

Solution: A great deal of money is lost through erosion, rather than through major purchases. A $4 coffee each working day adds up to around $1,000 annually. Add this to the costs of music, TV streaming, bottled water, drinks with your friends, weekly restaurant meals, a rarely used gym membership and so on, and there is a problem. To find out where your money goes, record your expenditure for a month. It is simple to identify areas for saving once a budget clearly illustrates your spending habits.

Trap 2 – Going with the crowd

Symptoms: You do what those in your social or work circle do, in terms of saving and investing, rather than figuring out a route to wealth that is distinctively yours.

Solution: Human beings are tribal. Not only do we surround ourselves with people similar to us, we also look to them for indicators of what we should do to improve our lives. But how similar are our retirement dreams? And is a certain investment worth more just because everybody else is buying? Every wealth plan should be completely individualised for the greatest chance of achieving one’s own goal.

Trap 3 – Raiding the re-draw

Symptoms: You constantly make use of your mortgage’s re-draw facility.

Solution: The re-draw facility of a mortgage is an excellent place to store money as it should help to reduce interest. But once money is in your mortgage it is good practice to consider it untouchable. So pay off as much as you can above the minimum, then keep other savings in a linked account that also reduces mortgage interest. Once the money is in the mortgage, leave it there.

Trap 4 – Running out of money each month

Symptoms: You live from pay cheque to pay cheque, often running out of money in the final week.

Solution: ASIC’s MoneySmart website says 16% of Australians save money easily, 41% save a little and 43% don’t save at all. Successful savers, they say, prioritise their saving because they have a clear plan, know how much money they need to save and regularly review their progress. Whatever your motivator, having savings is vital as a buffer for the hard times, or for the handling of unexpected expenses. So it’s best to make a plan, and make that plan a priority.