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 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
- 3 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 4 Mafia's wall of silence broken: Victim of Cosa Nostra's extortion rackets in its Corleone heartland co-operates with authorities for the first time ever
- 5 Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
9 reasons Greece's experiment with the radical left is doomed to failure
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...
Day In a Page
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 deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
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
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village