Handling money can be fraught with problems, especially when there is not much of it around. So we’ve put together a short guide to five of the most common financial mistakes people make.
1. Saving vs Debt
One of the most common money mistakes is to save money rather than paying off debts. Debt costs money, so reducing debt with savings makes more sense than having money set aside. Although it’s a nice feeling to have a financial buffer, paying off debts first needs to be a priority.
2. Spending More Than You Earn
Spending too much on non-essential items, maxing out credit cards, taking out loans for holidays, and generally spending more than we earn is easily done. But taking responsibility for our finances begins with reining in the amount of money we waste on things we don’t really need.
Insurance can be very expensive, so check you are not paying twice for items already covered by your home insurance. Mobile phones are normally covered, so this is unnecessary expenditure. Similarly, extended warranties on new electrical purchases are often expensive, and can also be covered by home insurance.
4. Car Loans
As soon as you drive a new car off the forecourt, it has already depreciated in value. Instead of taking out an expensive loan for a new car, think about investing in a good reliable second hand one.
5. Late Payment Fees
If you have loan or credit card repayments to make, not paying on time will cost you dear. Always set up direct debits to cover repayments to avoid late payment charges.