Ten bad habits that could cost us a small fortune
If you don't keep your eye on the ball, small financial oversights can soon add up. Chiara Cavaglieri offers tips on how to make big savings
Sunday 04 November 2012
We all have bad habits, but when it comes to finance, it's the little things that can add up to a big-money problem. But making a few changes here and there can mean huge savings, so now's the time to clean up your act and reap the benefits.
Banks rely on our apathy, but if you shop around for the best current account you could save, or even make money. It's easy to stay with the same bank but loyalty rarely pays, so find the right account for your needs, whether it's a cheap overdraft, or an account that pays you for being in credit such as the Halifax Reward account which offers £100 to switch and pays £5 for every month you pay in £1,000.
Forgetting old direct debits
Few of us check our statements carefully every month, but if you don't keep an eye on regular payments coming out of your account, you could be wasting money on things you don't need or use. List all the standing orders and direct debits going out every month and ask yourself if you need to keep paying it or can get it cheaper elsewhere. Remember to speak to your provider before you cancel any payments to avoid charges.
"You should have a clear idea of what is coming in and going out of your account each month. Spend five minutes looking at statements and identifying any mysterious payments you don't recognise," says Kevin Mountford, head of banking at MoneySupermarket.
Relying on plastic
We live in an increasingly cashless society and although credit cards are convenient and handy for one-off purchases and transferring existing debt, relying on them is dangerous. They can make it tricky to keep track of spending and you are more likely to buy things without thinking. Withdrawing cash instead is a great way to stick to a budget.
Paying off the wrong debts first
Different types of credit cost more – home loans and student loans are cheaper than personal loans and credit cards – so pay the most expensive debt first. High interest rates on credit cards are the cause of many debt problems so it's usually the first port of call.
Paying off as little as possible
Card issuers love people who only make the minimum repayments each month. If you do this it will take you much longer to pay off your debt and the interest will quickly stack up. With a credit card charging 20.9 per cent APR, for example, paying the minimum 2 per cent on a £1,000 balance would take 37 years, one month to clear, but if you repaid £50 every month, it would be paid off in two years, one month.
Using the wrong plastic
Credit cards are a useful tool, but only if used correctly. Steer clear of store credit cards enticing you with discounts at your favourite shops. These cards have high interest rates so any discount will be wiped out if you miss a payment. If you can't pay off your balance each month, look for a 0 per cent balance transfer card and aim to pay it off in full during that period. Switching a £2,500 credit card bill charging 18.3 per cent to a 0 per cent deal for the next 12 months will save £38 per month or £457 per year. If you do clear your balance in full each month, cashback cards are an easy way to boost your income. Britons spend on average £4,520 on their credit card, which could be worth a handy £100 using a cashback card, according to new figures from uSwitch.com.
"Using a card that pays you every time you spend is a simple way to boost your finances, effectively giving you something for nothing," says Michael Ossei, personal finance expert at uSwitch.com
Never checking your credit report
Checking your credit report for mistakes or inaccuracies could mean you are more likely to be approved for the best credit cards and mortgages. You can also see if anyone has fraudulently applied for cards, loans or bank accounts in your name. Get a copy of your report for £2 from one of the three credit reference agency files, Experian, Equifax (both offer free 30-day trials) and Callcredit (free via Noddle.co.uk).
Automatically renewing insurance
Review your home and contents and car insurance every year, not only checking for cheaper cover, but also reviewing the level of cover you're paying for. Don't opt for the cheapest policy without checking that it provides the cover you need. The cheapest travel insurance policies may not cover lost luggage, for example. Check the excess level too. High excesses render a policy pointless if you can't afford to pay them.
Not preparing for emergencies
Create an emergency fund to cover you if you can't work, or have to pay a surprise bill. Experts recommend a safety net to cover your expenses for ideally six, months. If you have insurance policies such as income protection (which replaces your salary if you have an accident or illness that prevents you from working) make sure they are up to date.
Never creating a budget
Knowledge is power, so draw up a budget to work out what you spend your money on and identify areas where you could be saving. Remember a little time and effort can go a long way, whether it's taking a packed lunch to work with you, or booking train tickets in advance.
- 1 Avengers: Age of Ultron: Nearly 700 German cinemas refuse to show movie
- 2 Donald Trump decides that Baltimore riots are Barack Obama's fault
- 3 X Factor in crisis as numbers of people auditioning plummets
- 4 General Election 2015: Stephen Hawking says he will vote Labour
- 5 Baltimore riots: Furious mother marches her son home live on TV
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
EU exit would hit UK economy much harder than neighbouring countries, study finds
Andrew Lloyd Webber: Phantom of the Opera writer mocked after issuing a warning about Ed Miliband and Nicola Sturgeon
General election 2015: Labour will toughen hate crimes legislation surrounding Islamophobia
iJobs Money & Business
£30000 - £38000 per annum: Recruitment Genius: They are a financial services c...
£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...
£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...
£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...
Day In a Page
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads