Eight common money mistakes you can easily avoid 

Shoestring Jane discusses eight of the biggest money mistakes you can easily avoid with awareness and planning

Regrets, I have a few, but unlike Frank Sinatra I often mention mine. When it comes to my finances, there are certainly things I have had to learn the hard way. There are common money mistakes you can easily avoid with awareness and planning, and here are eight of the biggest.

Not paying into your pension 

When you are younger, particularly if you are feeling the pinch, it may be tempting to opt out of paying into an employment pension scheme. But this is a huge money mistake. Many people aren’t saving enough to have a comfortable retirement, meaning they will have to work much longer and have a lower standard of living.

By opting out, you are turning down free money, and what sane person does that? Your employer is obliged to contribute towards your pension fund, but most won’t if you choose to opt out. You also get tax relief on your pension contributions, helping to build your pension pot further.

For more information on pensions, check out this article from Money Helper.

Not having an emergency fund

Putting away money each month into an emergency fund provides a reassuring cushion. Having, say, £1000, tucked away can make those rainy days feel less wet.

Unexpected car repairs, a dentist’s bill, or a washing machine breakdown can all be dealt with without having to use a credit card or take on debt.

Not saving

Once you are paying into your pension pot and emergency fund, having regular savings can provide an even bigger safety net and financial security for unexpected events like illness or redundancy.

Savings can allow you to reach life goals such as buying a home, travelling or putting money towards university costs for your children.

Over time, saving regularly will help you to grow your money too. Do some research to make sure you are getting the best interest rate possible.

Read more from Shoestring Jane
on Mouthy Money

Not budgeting

Creating a written budget of the money you have coming in and what will be going out is the first step to taking control of your finances.

If you don’t make a budget and track your spending, it is hard to know when you need to rein it in and where you can save. It also allows you to work out how much you can afford to put away in sinking funds for things like Christmas, birthdays, car repairs, etc., as well as in longer term savings.

If you don’t know where to start, you can use the free budget planner from Money Helper.

Overspending 

In a world when we are constantly bombarded with marketing, it can be hard to prevent impulse spending. But overspending regularly can make a serious dent in your bank balance and potentially lead to debt.

Tracking every bit of spending you do for a few months will make you super aware of all the occasions when you buy stuff you don’t really need.

You can go old-school and keep a spending book with you, but nowadays it’s easier to do this on your smart phone. Many banking apps have a tracker facility or you can download spending tracker apps.

Not doing your research

When you do need to buy something, a common money mistake is to rush into your purchase without doing some research beforehand to find the best price and any potential discounts.

Shopping around will invariably find you a better price. It takes time and effort, but the savings, particularly on expensive items, make this a good habit to get into.

Not buying insurance

Some things in our lives are too precious not to insure. Your home, for one; there is a reason mortgage providers insist you take out buildings insurance. But what about the contents? If you had a major event like a fire or flood could you afford to replace them? 

Personally, I think it is a mistake not to have home buildings and contents cover. I always add the accidental damage option as well.

Having worked on an insurance claims line in my youth, I know that these are some of the most common events. When my then two-year-old daughter decided to draw on our brand new stair carpet with indelible ink, I was glad I had it!

If you regularly carry items like smart phones, jewellery or laptops away from home, or have an expensive bicycle, you should consider getting insurance for them as well. Make sure you shop around to get the best deal.

I also insure my pets. They are precious to me, and I would hate to be in a situation where I couldn’t afford treatment for a serious or life-long health condition.

However, once you have insurance, never allow the policy to auto renew and shop around every year. 

Being a loyal customer

As well as not allowing your insurance policies to auto renew, it pays to question your loyalty to other businesses. Just because you have always shopped somewhere, it doesn’t mean you are getting the best value for money. Your utility provider may not be giving you the best value for money, nor your bank. 

In fact, you may be offered incentives as well as a better deal for switching banks, broadband providers, insurers and phone providers. This is another area where doing your research can pay dividends.

By avoiding these common money mistakes, you will make the best of your financial situation, increase your wealth and avoid wasting your hard-earned cash.

Have you made any money mistakes which you’ve learned from? Get in touch and tell us about your experiences

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