False economies – mistakes we make with money

The old expression penny wise, pound foolish is not recognised as an economic principle. The fact is that looking after small sums and being careful with everyday expenses can help us build up a bigger stock of pounds, to invest and enjoy.

But many of us make mistakes with the smaller amounts that add up to a big shortfall year by year. We look at some of the most common.

Not Having a Budget

If you don’t have a monthly budget, you don’t know what’s coming in and what’s going out. You can’t see when you are overspending, and when there is trouble brewing. It’s easy to set up a budget with an app on your smartphone, and even easier to see where all that cash is disappearing to. Log what you spend, and you’ll soon start seeing the things you can do without. The gym membership you never use, the muffin with your morning coffee might be among the first to go.

Not shopping around

With a budget planner that goes everywhere you do, you will start to see the benefits of shopping around. It’s not a matter of going to the discount store for cheap food (although the savings can be addictive). Shopping around is more important when you are buying things like car insurance or choosing a home energy supplier. There are plenty of comparison sites available. You can shop around for the best returns on savings too. See our rate calculator to help make your spare cash work for you.

Not paying off your credit card

Credit cards are dangerously addictive. Its all to easy to use them to buy the things you need and spread the cost over a month or two. But next month, you do the same thing again and the balance goes up.

Before you know it, paying off the minimum is getting harder, and you are trapped with growing interest payments making it harder still.

Switch to a 0% offer as soon as you can and be disciplined. Pay as much off as you can each month.

Not having an emergency fund

Emergencies happen. One of the reasons for having savings is to be able to call on them if something goes wrong. A loss of an income, and accident, a breakdown of your car or a key home appliance – they all mean costs that are a lot easier to deal with if you have a reserve of cash to call on. Traditional wisdom says that the equivalent of six months income in the bank is a good start. If the emergency never strikes, it’s still worth having. You can make sure it is working for you by keeping it in a high interest account and growing – hopefully faster than inflation.

Not planning for the future

None of us are getting any younger, and very few of us want to work until we drop. A state pension is less than generous. Both an employer pension and a private pension could prove much more rewarding.

An employer scheme wil offer both employer contributions as well as personal contributions and you will also get tax relief on both levels of contributions.  A private scheme will potentially offer more flexibility after the age of 55 when drawdown could be a consideration.

When you have dependents, having life insurance is also an important consideration for the future and ensuring you have the right type of policy is crucial.

Not getting professional advice

Trying to manage your financial affairs without professional advice can be the most dangerous money mistake of all. You may be aware of the basics, but the world of finance is full of traps for the unwary. Getting professional advice, on everything form your mortgage to savings, investments and your pension is a must to make the most of your money.

Naturally, at Continuum, we believe there is only one place to come for the professional advice you need.

The value of your pensions and investments, and the income they produce, can fall as well as rise and you may get back less than you invested.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate deposit accounts and finance.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.