Learning to handle your finances effectively is a part of life that never ends! We can all learn over time to manage our money in a more consistent, targeted manner, and perfection is never fair to expect – particularly from the younger among us.
What we can do, however, is learn at least to be proactive in our attempts. It doesn’t take much to get the ball rolling where budgeting and finances are concerned, and the payback is significant: we all could do with more money when we need it.
With that established, let’s take a look at some of the most common errors that UK citizens are making in 2017. You might spot yourself in a few of them; regardless of whether you are on this list, review what’s involved and do your best to become a financial expert with your own money.
Minimum Repayments Only
It’s perfectly fine to run a credit card, or several if you take advantage of suitable deals and offers. The problem arises when you allow debt to build up and only make the minimum repayments on those cards.
This is the trap that keeps the credit card providers making a profit every year. Similar to a mortgage, minimum repayments can find yourself throwing money at a company while doing little to nothing to reduce your total debt. If you are unable to do more than minimum repayments on your obligations, you are in a serious debt situation that needs immediate attention.
How to avoid this? Plan your spending in advance. It’s no bad thing to use a credit card for a large purchase, but it immediately becomes an issue if you find yourself unable to effectively manage repayments above the minimum requirement.
Whenever taking a payment through a credit card, you should know in advance how long it will take you to wipe the debt in full. The faster, the better. Never settle for minimum only; it will rear its ugly head in the future.
Saving When in Debt
This one may turn a few heads, but it’s a common mistake that is prevalent in the United Kingdom because it involves a sound financial practice: saving money.
In isolation, we at Everday Loans will always encourage you to save money for the future. It’s simply common sense that rewards you in time. Every person should have a savings net; the most common figure advised is three months of living expenses.
The problem arises when you continue to save while having debt obligations. Let’s say you have a credit card with monthly repayments on it. You might be working towards that savings safety net, and you certainly should retain the progress you’ve made towards it, but you shouldn’t continue saving while that credit card holds you back.
It all comes down to efficiency. You’ll be paying interest on that credit card debt and if you take money away from wiping it off entirely, your savings effectively are reduced every month. It’s better by far to throw all available money at the debt, remove it, and return to your responsible savings patterns.
Applying for Products Rapidly
A subtle error made by adults worldwide is that of applying for new credit in swathes. It’s fine to look towards securing a new product such as a car on a repayment plan, but the danger arises when you are turned down and seek alternatives.
The reason? When you are turned down for credit, a temporary note is put on your file. This disappears in time, but it can damage your credit rating in a more permanent fashion if you make multiple attempts in a short time. It’s easy to see why; it paints the picture that you are taking irresponsible risks and are desperate to acquire something at the expense of your rating.
The way around this issue is to make use of comparison websites for your products. Combine this with free credit rating checks to get a sounding of your current situation and options without risking damage to your credit rating.