My 3 big money mistakes, and what I learned from them

By learning from her money mistakes, Jessica has been able to supercharge her financial success. (Source: supplied/Getty) (Samantha Menzies)

I’ve worked in financial services for almost two decades so it would be easy to assume that I’ve done everything perfectly. I wish that was the truth, but it isn’t.

I, like many people, have wasted money, time, and opportunities. But, while there is so much shame around money mistakes, I believe the more we talk about them, the less taboo the topic will become and then, the more we can learn from them.

Talking about money openly, and where we have gone wrong, can help to create a wonderful cycle where we all learn and grow our wealth at a faster pace.

Also by Jessica Brady:

• Boost your bank balance: 3 tips for financial success

• Tax time: How to get the most value out of your return

• The forgotten Aussies in this budget

So, here are three mistakes I’ve made when it comes to my money decisions, what I learned, and how you can avoid going down the same path.

Mistake 1: Not managing my cash flow effectively

Cashflow management is your secret weapon for creating habits, reducing money life admin, and getting on top of your financial goals.

I was a good saver from a very young age so I never really felt I needed a clear and defined way to manage my income. It was generally lumped in only a few pools and required lots of manual attention and effort to pay bills, move money into savings, or track spending. It felt heavy and annoying, and I didn’t enjoy doing it.

I don’t like tracking every single discretionary item I spend money on. I am quite good at making value-aligned purchasing decisions, so I didn’t feel the need. Another mistake.

But when I was in my mid-20s I changed my process and have never looked back. I set up different bank accounts (separating them according to purpose) and automated payments into them when I was paid. I set up all my bills to come from one account and had a buffer in there to withstand any additional or unforeseen bills. I also automated a payment to go straight to my ‘goals’ account to make sure I didn’t spend all of my earnings.

I also pay myself a weekly amount for discretionary costs – groceries, weekend plans, clothes, etc. Once the pot is out, I have to wait for the next weekly allocation.

By managing my cash flow more effectively with freedom within set boundaries, I’ve been able to save time and also learn how to grow my money, not just move it around to pay for things.

Mistake 2: Not reinvesting dividends

When I was in my early 20s, I started getting dividends from my shares in the form of cheques. Dividends are a distribution of profit to shareholders so, little young me thought this was the best thing ever - free money. I banked that cash and spent it on... who knows what.

What I didn’t understand was the power and importance of compounding. I could have reinvested that money, bought more shares and, therefore, received more dividends to buy more shares. I wouldn’t have missed the money because I wasn’t expecting it anyway and would have been able to get ahead in my investing game much earlier.

If you get a dividend or distribution, have a plan for the money that will look after your long-term financial goals. You may choose to reinvest it back into that company (you can normally set up an auto reinvestment option) or, if you want to diversify, you can elect for it to go into cash and buy into other assets or portfolios. If I could go back in time, I would have used my dividends very differently.

My fear made me run away from opportunity rather than lean in and grow my knowledge of how to use investment markets to supercharge my financial position.

Mistake 3: Fear-driven investment decisions

I didn’t grow up with money so I had a fear-and-control mindset around it. Early on, I was scared to put my hard-earned cash in investment markets because I couldn’t control the outcome. My fear made me run away from opportunity rather than lean in and grow my knowledge of how to use investment markets to supercharge my financial position.

Once I started to understand how to diversify investments, manage risk and choose the right asset allocation (where the money is going) suitable for my different goals, I had to bite the bullet and actually override my fear-and-control mentality. I didn’t wait until that fear was gone, I pushed through it. Yes, it was terrifying, but it was worth every minute.

Jessica Brady is a licensed financial adviser and founder of online financial-literacy program the Greenhouse. Jess is on a mission to help all Australians manage money better and empower Australians to control their finances. For money tips, you can follow her on Instagram or LinkedIn.

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