How healthy is your bank balance?
VICKY SHAW FINDS OUT HOW TO CURE SOME COMMON FINANCIAL ‘AILMENTS’
OCTOBER marks ‘Stoptober’ month – when smokers up and down the country are encouraged to quit the habit for good. But, whether or not you’re a smoker, why not also consider quitting any nasty financial habits you’ve picked up?
“This Stoptober is a great opportunity to stub out your worst financial habits,” says Sarah Coles, a personal finance analyst at Hargreaves Lansdown.
Not sure you even have any? Well, some of those habits might have become so ingrained that you don’t even realise you have them, notes Sarah. So what are the warning signs, and how can you quit bad financial habits for good? Here, Sarah shares her expert insights and advice... THE SYMPTOM: Casually dipping into debt YOU don’t have to go terribly overdrawn for particularly long for this to start making a big dent in your finances.
THE CURE: If you regularly dip into your overdraft, the answer lies in drawing up a household budget, and identifying the regular costs you can cut.
This may mean shopping around on essential bills and groceries, or cutting out those things you don’t get much value from, such as gym membership or expensive media packages.
If you’re a repeat offender, consider setting up text alerts in online banking, which will text you if you’re running the risk of going overdrawn. THE SYMPTOM: Only paying the minimum amount back on your borrowing THE minimum payment required on your credit card can easily lull you into a false sense of security. But by paying the debt down at a snail’s pace, you could be racking up shocking interest charges.
THE CURE: If you have expensive debts like credit cards, it’s essential to pay them off as quickly as possible.
If you have a significant balance, it may be worth switching in order to cut interest payments in the interim.
However, if you switch, it’s vital to see this purely as a mechanism for debt repayment. If you’re tempted to rack up more borrowing, you’ll end up in an even more expensive position. THE SYMPTOM: Forgetting about your savings ACCORDING to a 2015 study, some 80% of easy access savings accounts hadn’t been switched in the previous three years.
Neglecting savings is an expensive habit to fall into because, over time, the rates on these accounts are likely to have become less competitive - especially if a bonus was applied at the outset.
THE CURE: Even in this era of low interest rates, it pays to make a date to regularly check what you are earning on your savings, and if the rate is no longer competitive, make a switch. THE SYMPTOM: Not making the most of tax shelters ARE you making the most of the tax advantages offered by pensions and Isas, for example?
THE CURE: At the start of each tax year, it’s worth taking stock of your savings and investments, and asking yourself whether you really need to be paying tax on them. THE SYMPTOM: Putting plans off LONG-TERM goals like retirement may seem a long way off, but every day you save makes a big difference.
It’s not just the years of contributions you will miss by putting things off, but the effect of compounding returns – which is jaw-dropping.
THE CURE: There are always too many demands on your money, but as a general rule, it pays to invest as much as you can afford for retirement, as early as you can afford to do so.