Whip your finances into shape this year by avoiding these common money mistakes
At any age these personal finance no nos are all too common. It’s one thing when you’re in your 20s and only have to worry about yourself, but if you have a family suddenly the stakes are higher. At this time of year in particular, many of us are guilty of number one. How many of these financial sins are you making?
SPENDING YOUR MONEY ON RUBBISH
Yes, really, and you don’t even know you’re spending your money on rubbish because you don’t have a household budget. One hundred euro can just disappear on a Saturday between breakfast out, a few unnecessary purchases in that cute kids’ clothes shop, McDonald’s for tea and movies and treats for a night in.
Get on top of your finances by working out a household budget.
WASTING MONEY ON UNNECESSARY BANK FEES AND CHARGES
If you’re thinking, ‘that’s not me’ and are about to skip on to the next point, hang on a minute. I’m talking about your everyday transaction fees which can seriously mount up - how does €92 in quarter one of this year sound? Sounds like a waste of money to me. If you’re an AIB personal account customer, you’re probably paying 35 cent per self service transaction and 39 cent for a paper/ assisted transaction and that’s on top of a maintenance fee of €4.50 per quarter.
Inform yourself of your banks’ policy on fees and try to avoid them. There are usually one or two ways in which you can at least reduce them. For example, at AIB you can avoid maintenance and transaction fees by keeping a balance of at least €2,500 in your account. If that doesn’t seem achievable, shop around and switch.
PAYING THE MINIMUM REPAYMENT ON YOUR CREDIT CARD
You know credit card interest is the highest there is. By allowing your credit card debt to mount up, you’re saying yes to years of clearing it, all the while paying between 10 and 20 per cent interest, depending on the card. By prioritising short-term cash flow you’re eroding your future spending power in a big way.
Inform yourself of your credit card interest rate and change cards if you find a more favourable rate. From time to time card companies offer interest-free balance transfers. Pay off the outstanding balance every month or as much as you can afford to.
FAILING TO SAVE FOR EMERGENCIES
You should have between three and six months’ net income saved for unforeseeable disasters such as redundancy, illness etc. Aside from the huge piece of mind this buffer will give you, it will prevent you from resorting to debt when disaster strikes.
Find the highest-paying savings account with reasonable access to your money and set up a standing order from your current account.
NOT SHOPPING AROUND
Since the energy markets opened up to new operators we can move from provider to provider in the same way we can change phone service provider. If you have already switched, pay attention to when your switching offer runs out. it may no longer be the most competitive supplier. Examine your consumption and compare the offers available for gas, electricity, internet, phone and TV. Shop around and move around.
Use www.bonkers.ie or another comparison websites to compare providers.
NOT PROTECTING OURSELVES AND OUR FAMILIES
Your bank insists you take out mortgage protection so that they get their loan back should anything happen to you. What about your family? Not having adequate insurance is a common financial sin. Check your workplace benefits. Do you have deathinservice benefit and if so, how much? Are you covered in the event that you are out of work through accident, illness or disability?
Review your life insurance and death-in-service cover to make sure your family will be looked after should anything happen to you. There are plenty of blogs on the subject or an independent financial planner will help you figure out if you are adequately covered.
TURNING YOUR BACK ON FREE MONEY
If your employer contributes to a pension scheme, take full advantage of money for old rope. Start contributing to the scheme or increase your contributions to take advantage of the employer contributions. What’s more, you can get tax relief at the highest rate on a certain proportion of your contributions. For example, if you are between 40 and 49, you put up to 25 per cent of your gross earnings into your pension and get tax relief on it.
Ask your employer for a meeting about your occupational pension and make sure you are making the most of it.