7 Financial Habits The Experts Want You To Break
STOP… Impulse Buying
Tom Martin, money expert at Chip, an automatic saving app, says…
“One of the worst financial habits which stops people from saving is making unnecessary purchases. It can be very tempting to treat yourself, take advantage of yet another sale, or add another thing to your shopping basket, but before you do that, ask yourself if you really need it. Also, check your bank balance: can you afford this? Even if you can, still try to use price comparison sites like Idealo and Camelcamelcamel to reveal the price history of a given product, telling you if and when it was at a lower price. You can also use a Google Chrome plug-in called Honey that will automatically check for any available promo codes to get you an even lower price. And if you don't end up making that purchase, move the money into your savings. If you do choose to save up for a larger purchase, the satisfaction from having reached that goal will be far greater than the fleeting joy of buying that item you don't really need and, let's be honest, probably won't end up getting enough use of.”
STOP… Living Beyond Your Means
Holly Andrews, managing director at KIS Finance, says…
“If you’re having to use credit cards to pay for any essential outgoing such as bills or food, then this is a sign that you’re living beyond your means. It’s a really bad habit to get into, as once you’re in the cycle, it can be really difficult to get out of. One really good way of addressing this is to create a budget. Not only will this allow you to identify the scale of the problem, it will also help you regain control. First, determine your monthly income, including your main salary and any other sources of revenue, and put this at the top. Then, calculate how much money you spend each month. This includes every single bill, payment or transaction you make on a regular monthly basis, so mortgage/rent payments, gas and electricity bills, credit card payments, insurance premiums, subscriptions, groceries and any other expenses. Subtract the outgoings from the income, and that will give you an answer as to how much you’re spending compared to how much you’re earning. Now you’ve got the start of a budget in place, you will be able to see where you’re overspending and where you can cut down. If you’ve been living this way for a long time, you’re not going to be able to fix the problem overnight, so you’ll need to have some perseverance and commit to long-term change. Start small – like cancelling a subscription service you don’t use or committing to only eating out once a week if you were doing this more often.”
STOP… Buying Lunch Every Day
George Charles from MoneySavingHeroes.co.uk, says…
“Breaking any habit can be tough, but financial ones can be especially challenging because they are usually done out of convenience. An example of a common convenient bad spending habit is buying lunch every day. It’s so easy to forget to prepare lunch and bring it into work and there are many of us who simply do not have the energy to make food after a full day in the office. But buying lunch every single day does add up. This money could be saved and put towards something exciting like a holiday, house or car. The best way to break this kind of habit is by bulk making your lunches; on a Sunday prepare your meals for the week and pop them in the fridge. This way you’ll avoid that evening slump where you put off doing it. This way, you’ll find it far easier to leave the meal deals behind.”
STOP… Trying To Get Rich Quick
Mark Pittaccio, behavioural economist and business consultant at Quilter, says…
"Worryingly, people think the right investment will make them rich – quick. Just buying some shares isn't the whole story. To invest well you need to understand risk, diversification, timescales and your own objectives. Research shows a lot of people hold too few shares, or an 'undiversified' portfolio of investments, ignore opportunities in overseas markets, panic sell and buy, and fail to take account of changing risks in the market. Some of this is about knowledge of investment, but most often we find the emotional element is where people make a mistake. When you are watching the value of your money go down, it's hard to take a step back and not just pull it all out. But that is exactly what you have to do to counteract what may seem like an intuitive response."
STOP… Ignoring Your Pension
Emma-Lou Montgomery, associate director at Fidelity International, says…
“Retirement can seem a long way away but putting retirement plans on the back-burner is a really bad financial habit. For women, this is particularly important as they’re still more likely to take time off work (and therefore lose contributions) due to having children or caring for an elderly relative. Not enough women are aware of how significantly time away from work can limit their retirement finances, or how little you need to contribute to make a difference. Anyone can be an investor, and if you are already enrolled in a workplace pension you already are. Small amounts invested early can make a huge difference in later life. Indeed, our own research found that if a woman invested an extra 1% of their salary into their workplace pension – that’s just £35 a month on the average UK salary – they would close the 11% gender pension gap in retirement”.
STOP… Damaging Your Credit Score
Grace Goodey, product manager of Creditwise at Capital One, says…
“Not being familiar with your credit score – or understanding what impacts it – can often have bad effects on your financial health. In fact, data from Mintel shows that 48% of Britons never check their credit scores. A bad credit score can be caused by making late payments, or only ever paying your minimum amount; opening and closing multiple credit cards on a regular basis and making multiple applications; impulse buying and not considering your budget; and maxing out your available credit limit A ’bad’ score could limit your options when it comes to borrowing money in the future – including mortgages, car finance and personal loans. But with time and effort (and brushing up on your financial knowledge), you can improve the situation. There are several free credit score tools available, which allow you to see your score, what's impacting it and how to improve it.”
STOP… Hiding Things From Your Partner
Sharon Bonfield, from wealth management firm St James’s Place, says…
“Money is one of the top reasons cited for marriage breakdowns in the UK. Many couples simply don’t talk about it or make financial plans together, but the act of doing so can not only help to make your marriage last, but will also ensure you are well prepared should the worst happen. As a woman, you are likely to be worse off in retirement than a man, and the situation is even worse if you are divorced.
This could be because women are, understandably, preparing for a joint retirement with their spouse. Or, they might not be fully involved in the financial decisions being made with regard to retirement planning over the course of their working lives. By discussing your retirement plans as a couple, you will be better informed for all eventualities. By discussing money matters as a couple, setting goals and getting professional advice when you need it, you will be better prepared for all eventualities.”
For free, informal financial advice contact The Citizen’s Advice Bureau or Money Advice Service.
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