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Your Money > Budgeting Articles > 10 money mistakes...
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By Jane Baker
There are lots of ways things can go wrong with your finances. Here are ten of the worst money mistakes - and how to make sure they don't trip you up. No matter how sensible and disciplined you are with your money, mistakes can still happen. Sometimes things go wrong simply because you didn't know there was a better way. But forewarned is forearmed. So, here's ten of the worst money mistakes that I think you should try to avoid at all costs: 1. Missing a payment on your balance transfer credit card (or paying late) There's nothing better than a top balance transfer credit card for kicking your debts into touch. This is a great way a putting a full stop on your interest payments for a while, giving you plenty of time to chip away at your balance. Of course, it's never good to make late or missed payments on any credit card, but it's particularly bad news for balance transfer cards. If you break the rules, your card provider usually has the right to cancel your 0% deal there and then, leaving you with a very costly debt with an average APR of 16%. Luckily, all you need to do to is set up a direct debit payment from the word go, to make sure that doesn't happen. 2. Paying the minimum monthly repayment on your credit card Just because you can pay a tiny amount off your credit card every month, that doesn't mean you should. I think it's a real worry that some card providers are sneaky enough to set the minimum monthly repayment below the amount of interest you'll be charged. In other words, your repayments won't even cover the interest you're racking up, let alone reduce the actual debt itself. My advice: pay the maximum monthly payment you can afford, not the minimum monthly payment you're allowed to. Otherwise, you may never get rid of your debt. 3. Leaving your savings to languish Ok, it's not the end of the world if your savings don't earn the best possible rates, but why should you put up with it? I suggest you review your savings at least every six months to check how competitive your accounts are. If they're falling behind then switch pronto. You can do this easily by comparing everything on offer at our savings centre. 4. Withdrawing money from your cash ISA Cash ISAs are a great way of earning a tax-free return. Current rules only allow £3,600 to be saved in any tax year (although this is about to increase for the over-50s). But did you know if you've already paid in the full amount, and then you make a withdrawal, you won't be able to replace the money until the new allowance becomes available to you at the start of the next tax year? If you need to get your hands on some cash, your ISAs should be the last port of call. 5. Underinsuring yourself When it comes to life insurance, we tend to underestimate the amount of cover we should have. This could leave your family with a real financial nightmare if the worst happens to you. 6. Buying at the top of the market, or selling at the bottom Whether it's property or shares, buying at the top of the market, or selling at the bottom, is a surefire way to lose an awful lot of money. Of course, it can be extremely difficult to judge where the top or bottom might be, but do think very carefully before you take the plunge. For new homeowners, facing negative equity as soon as you step on the property ladder is a situation best avoided. 7. Missing the best mortgage deal It's tricky in these post credit crunch times to get the best mortgage. After all, the top deals are normally reserved for borrowers with a 25% or 40% deposit. But that's no excuse for taking your eye off the ball. Your mortgage is probably your biggest monthly bill by far, so it makes sense to cut it down as much as possible. So, whenever you come to the end of a deal, make sure you look around for a competitive replacement. 8. Starting your retirement planning too late There's no doubt the sooner you start paying into a pension the better. After all, they love nothing more than decades and decades in which to grow. Most pensions invest in the stock market, which should be a long-term strategy to iron out the troughs and capitalise on the peaks. Even if you're not using a pension - perhaps you prefer ISAs or property instead - don't leave it too late. 9. Forgetting the open market option Most pension savers will buy an annuity when they retire to convert their pension pot into an income. When the time comes for you to take benefits from your pension, you must, must, must shop around for the best deal. This is known as exercising the open market option (OMO). The difference in annuity rates paid by the best and worst annuity providers is huge, so you could really lose out by choosing the wrong one. 10. Overstretching your budget Finally, there's no point in avoiding all these mistakes, if you then go and splurge too much money. Overspending is easily done if you don't keep a tight rein on your finances. Good budgeting is the key.
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