With household spending on the rise, many families across the UK are looking at their financial situation in the hopes of making changes for the better. There are many financial mistakes that the average household can make over time; here are four of the most common, and how you can overcome them.
Unnecessary Spending
Perhaps the single most common financial mistake people make is the simple act of overspending, or spending beyond their means. You might find yourself a little tight on cash at the end of each month, despite earning enough to maintain your lifestyle – and a lot of this will come down to what is essentially wasteful spending practices. For example, how often do you buy fresh groceries in a weekly shop, only to throw them out after they’ve mouldered in the fridge? This waste food can represent a significant amount of your monthly spend, and may only be the tip of the iceberg. Your first step to avoiding this should be to interrogate your spending habits: do you need it, or do you simply want it? If you don’t buy it now, will you still want it in a month? To curtail spontaneous spending, try setting a daily limit on your debit card.
Not Having an Emergency Fund
Saving up can be a tricky thing to do for many people, no matter your income or overheads – but failing to create an emergency cushion of savings can be a major financial oversight for the household. Without an emergency fund, surprise expenditures like urgent car repair or a dentist’s bill can be devastating to your cashflow, and even put you in debt. Putting a little extra aside month on month can prevent such sudden costs from affecting your credit and day-to-day life.
Overusing Credit Cards
Speaking of credit, an incredibly easy mistake to make with regard to your finances lies in the overuse of lines of credit. Moderate use of credit cards can be beneficial to your credit rating, and even helpful in the management of larger purchases every now and then – but without due care, using credit cards can quickly become abusing credit cards, and you can find yourself living with unmanageable amounts of debt. To prevent this from happening, make sure only to have one line of credit at a time, and to only use your credit card for purchases you know you can afford without missing a repayment. If you are already in credit card debt, your priority should be paying it off; settling your debts can improve your credit score, as well as help you avoid haemorrhaging money on interest.
Not Investing in Retirement
Not saving money for retirement is a financial mistake especially true of the UK’s freelance population. Freelancers are only eligible for State Pension if they keep up with National Insurance contributions – but State Pension is often not enough to allow retirees to continue to enjoy their present quality of life, let alone improve it for their retirement days. But in recent years, the error has become increasingly applicable even contracted employees. A cost-of-living crisis and the threat of long-term inflation has culminated in the possibility that your pension pot will not stretch nearly as far as it could, let alone as far as it would in the present day. As such, it is imperative that you take further steps to securing your retirement.
Financial advisors in London have an excellent reputation for advice on long-term financial plans and later life; retaining their services could be useful in figuring out what you can afford with regard to retirement. In the meantime, one simple solution could be to voluntarily increase your pension contributions – but paying into a separate investment fund can help defeat inflation with competitive ROIs, ensuring your retirement pot matches your cost of living in later life.
