(Updated for 2018)
Everyone makes mistakes. And it does seem that we all do tend to make the same money mistakes. We even make some of them over and over again. This is a problem on a number of levels, but most of all because these common mistakes can seriously derail your current and future financial health.
Here’s a look at some of the most commonly made of these mistakes and how they can be avoided:
Not Making a Plan for Retirement
The days when a company pension would keep you in good financial shape when you retired are long gone. And as we all know, state pensions are rarely enough to keep one’s head above water let alone maintain the lifestyle you were used to when you were working.
All of this seems a long, long way away when you are in your twenties and thirties though. Actually in your forties for many of us as well. But retirement can creep up on you a lot sooner than you expect, and the last thing you want to realise when this happens is that you haven’t saved for the future.
If you neglect to make a proper retirement plan you could find yourself facing serious financial consequences when the time comes to get that golden clock and bid the working life goodbye. So, organise your pension plan early and add to it regularly. The earlier you start the better off you’ll be in the future when you do reach retirement age, even if that’s still decades away.
Baulking at Budgets
Sitting down and actually making a budget can seem like a very cumbersome and boring thing to do. Actually trying to stick to it can be boring – and rather tough – too. You survive right? Who has the time to sit down and break down their incomings and outgoings into some silly little spreadsheet?
Well, boring or not, every financial expert in the world will tell you that making – and sticking – to a monthly budget is crucial to your overall financial health, both now and in the future.
Contrary to what you might think a living within your budget does not mean you have to give up your social life – and those other little luxuries that make life a little more bearable – completely. You just need to set aside a reasonable, workable amount that can be spent on them on a monthly basis and, when that’s gone, at least you’ll still be solvent and have still had some fun.
Failing to Plan for a Rainy Day
You made a budget (finally) Good for you! Now, here’s a question. Did you add in saving for the proverbial rainy day? Many of us don’t, and when something does go wrong it can blow all of those wonderful budgeting efforts out of the water.
Yes, if the washing machine packs in, or your car breaks down, or if your fur child gets sick and needs to go to the vets and you need cash fast you can often get a short-term loan to help. However, such things should really be a last resort.
Having a rainy day fund can bring you a great deal of peace of mind and help you stay out of debt. And they are easier to build up than you might imagine. That £2.50 you spend on that tiny little Flat White from Starbucks every morning on the way to work? Stop doing that and bring your coffee from home and you could stash away £12.50 a week, which will turn into £50 a month.
Not the hugest sum, but a good start and there are almost certainly other, similar ‘little’ regular expenditures you could cut fairly painlessly to help you save even more.
Being a Sucker for a ‘Great Deal’
We all can get suckered in by a good deal every now and then, but do you really know how much you’re saving?
Even when you’re buying things on sale you’re still spending money – money you perhaps wouldn’t have spent otherwise. Would you really have bought those three boxes of cornflakes if they hadn’t been on sale? Especially if it’s likely they won’t all get eaten before they go stale? Sometimes a great deal isn’t quite as good as you thought if you stop and think about it.
Try not to get drawn in so often in by ‘potential’ savings and start thinking more about what you’re actually saving. There’s a right way and a wrong way to take advantage of discounts, so make sure you’re not giving in to the tempting offers that don’t really make financial sense and spending what you shouldn’t.
Not Factoring in Long-Term Extra Expense
There are some substantial – and sometimes very necessary – expenses that we find difficult to see as long-term expenses. We see the big numbers in the initial cost, but not the small numbers that inevitably trail after them.
Take buying a car for example. Many people just consider the monthly finance payment and their car insurance. They fail to take into consideration all of the other expenses attached to car ownership, and they can really add up!
This is why we at LoanPig always think carefully about the loans we offer people and have a Loan Calculator to show you how interest will affect your loan before you apply for it. While you might be able to afford to pay back the general sum, the interest that is added to it can sneak up on you if you’re not prepared for it.
Before you make a big financial commitment, think carefully about all of the additional costs and additional expenses that might come with it. That way, you will be sure not to commit to something that will drain your future savings.