Over the last few years, costs for everything from utilities to groceries have soared, putting our finances under pressure and making saving money a priority.
While there are many tips on how to save money, do you ever consider what mistakes to avoid?
We’ll now reveal the most common financial mistakes that could cost you money.
While it’s good to treat yourself, overspending can be one of the top financial mistakes to make.
Whether you regularly dine out or buy lunch every day, these costs can easily add up.
For example, if you buy a coffee and a lunch deal once a week for £6.50, this will cost you £338 over a year.
Regularly reviewing your spending or identifying areas where you could cut back could help you boost your savings pot for a rainy day.
2. You never review your finances
It can be overwhelming to think – and act – on your finances, but it can pay off in the long run.
There are many ways to save money whether it’s negotiating price hikes on your broadband or shopping around for the best deals.
Reviewing your direct debits every few months could also help you avoid losing money on subscriptions you no longer use, such as a gym membership.
3. You don’t have a budget or an emergency fund
Having a budget can transform your finances as it helps you pinpoint how you spend your money – and cut back on spending if necessary.
If you have any long-term goals, such as buying your first home, a budget can help you identify how much you can save and how long it’ll take you to reach your goal.
As life can be unpredictable, an emergency fund can also help you navigate any unwelcome surprises.
If you don’t have an emergency fund, it’s a good idea to build one that’s worth three to six months of your monthly outgoings.
That way, if you lose your job or face a huge bill out of the blue, you can easily handle it without resorting to expensive borrowing.
4. Getting hit with hidden fees
Whether it’s a fee for exceeding your overdraft limit or paying a credit card bill late, hidden charges (or more expensive rates) can be costly.
It’s a good idea to keep track of when payments are due and when any contracts are due to expire.
For example, if you have a mortgage and this expires, you’ll be switched to the standard variable rate (SVR), which tends to be more expensive.
5. Not saving enough for retirement
While it can be easy to put off saving for retirement, the earlier you start, the more you’ll save.
Pensions offer tax relief and benefit from compound interest (where you’ll earn interest on your interest), so a small amount can snowball into a bigger savings pot.
If you have a workplace pension, your employer will also contribute to your pension – and some may offer more than the minimum amounts if you increase your contributions.
Are you not sure how to plan your retirement?
Unbiased can connect you with a financial adviser who can look at your circumstances and help you devise a plan.
6. Using a credit card at an ATM
Have a credit card? Don’t use it to withdraw cash from an ATM. Not only will you be charged, but this will be recorded on your credit report and may be seen as a red flag by potential lenders.
If you need cash, it’s best to use a debit card for withdrawals instead.
7. Paying too much tax or missing out on pension tax relief
There are many ways in which you can end up paying too much tax.
If you’re a higher-rate or additional-rate taxpayer, you’ll need to claim extra tax relief for the money you put into your pension.
It’s best to call HMRC if you’re missing out on tax relief or have overpaid tax.
8. Not getting insurance
Whether you’re going travelling or want to insure your car or belongings, insurance is essential.
It’s a good idea to shop around and make sure your insurance covers everything you need it to, so you’re not caught out by the fine print.
While insurance can be pricey depending on your circumstances, it’s usually a cheaper option than having no protection in place in case the unexpected happens.
9. Being a loyal customer
While it’s easy to believe that loyalty to your bank or other service provider pays off, the opposite is often true.
For example, you may be able to get cash for switching banks, or a better broadband service or a free gift by going to another provider.
It’s always worth shopping around to find the best deal for you – especially if a price hike is on the horizon.
10. Not using credit cards wisely
If you need a 0% credit card, it’s a good idea to get one that’s specific to your circumstances.
For example, you can use a 0% credit card to spread the cost of a big purchase, make your debt less expensive or boost your credit score – and you can get Section 75 protection for certain purchases.
You’ll need to ensure you pay off at least the minimum balance every month and have a plan in place to clear your debt, especially if your credit card has a limited-time 0% offer, as the interest rate can be very high after it expires.
How can a financial adviser help?
If you’re struggling to meet your financial goals, an independent adviser can help.
They will look at your circumstances and future goals to help you achieve them – and offer vital guidance so you avoid costly mistakes.
Unbiased can connect you to a financial adviser today.