Nobody is perfect with money. Most of us have a habit or two that costs more than it should, and usually it is not one big decision but lots of small ones. The upside is that small fixes can make a big difference over a year.
Here are six of the mistakes we see most often, why they matter and what to do instead.
1. Having no emergency fund
When the washing machine breaks or a car needs a new tyre, people without savings often reach for a credit card or overdraft. The repair then costs more than its price tag once interest is added.
The fix: start small. Set up a standing order for a modest amount on payday into a separate savings account, so it goes before you have a chance to spend it. Aim first for enough to cover one unexpected bill, then build towards a month's essential spending. Our guide to planning for irregular expenses shows how to separate known yearly costs from true emergencies.
2. Paying only the minimum on credit cards
Minimum payments are set low on purpose. Pay only the minimum and most of your payment can go on interest, so the balance barely moves and the debt can last for years.
The fix: one common approach is to pay a fixed amount each month that is higher than the minimum, and keep paying it even as the minimum falls. If you have several cards, putting any extra towards the one with the highest interest rate clears the most expensive debt first. If you are struggling to pay even the minimum, that is a sign to get free advice, and our article on practical ways to get out of debt is a good place to start.
3. Never checking your bills
Contracts for broadband, mobile phones, insurance and energy often roll onto higher prices when a deal ends. Subscriptions you signed up to once and forgot can keep going for months.
The fix: once a year, go through every regular payment on your bank statement. For each one, ask three questions:
- Do I still use this?
- Is my deal about to end, or has it already ended?
- Could I pay less by switching or by asking for a better price?
Put the end date of each contract in your calendar so the next renewal does not catch you out.
4. Spending on impulse
One-click checkouts, saved card details and pay later options make it very easy to buy things you had not planned to. Each purchase may be small, but they add up.
The fix: build in a pause. Remove saved card details from shopping sites, unsubscribe from marketing emails and wait 48 hours before any non-essential purchase over an amount you choose. If you still want it after two days, at least it is a decision rather than an impulse. Be particularly careful with buy now pay later, as several small instalments can quickly turn into a large monthly commitment.
5. Ignoring your credit report
Many people only look at their credit file when they are turned down for something. By then, an error or an old address could already have caused problems.
The fix: check your statutory credit report with all three agencies, Experian, Equifax and TransUnion, at least once a year. It is free. Make sure you are on the electoral register and that there are no accounts you do not recognise. Our guide to what affects your credit score explains what to look for.
6. Not knowing where your money goes
If you get to the end of the month and wonder where it all went, you are not alone. Without a clear picture, it is impossible to tell which changes would help most.
The fix: track every penny for one month. Most banking apps sort your spending into categories automatically. Compare the totals with what you thought you spent, then decide where to cut. If you want extra money coming in as well, our ideas for earning extra income on the side may help. This article is general information, not financial advice. If your money worries feel overwhelming, free and confidential help is available from MoneyHelper and StepChange.
