We are designed to develop habits. When we've done something for a while and it doesn't seem to have done much damage, we tend to keep doing it on the assumption that it's working. Back in our hunting and gathering past this was the only sensible way to live, as we learned that eating the berries we'd always eaten, and not experimenting with the shiny red ones, was the best way to ensure survival. Now, however, as life has moved quite a long way past berry eating, many of us are making subtle and dangerous mistakes every month, and by falling into these habits we risk real financial problems further down the line.
The start of the year is always a sensible time to revisit the things we do out of habit, and ditch the ones that are causing us real harm. To get you started, we reveal the 15 financial habits you need to break in 2015.
1. Working without a budget
Two in every five people have no budget at all. It's hardly surprising, because sitting down and working out your income and outgoings is no fun. However, without a budget, there's no way to work out what you can afford every month. Your entire spending strategy therefore depends on guesswork - which stands absolutely no chance of success.
There's no excuse for refusing to think things through. Buying something because we fancy it at the time has all sorts of triggers: sometimes we do it when we're tired, or bored, or need cheering up. None of these are good reasons for a purchase, and they'll all persuade us we need something that we haven't budgeted for and often cannot afford.
3. Habitual shopping
Habitual shopping seems pragmatic and sensible, gliding through the supermarket, picking up the items and brands we always buy. It's the modern equivalent of gathering the same berries every day. However, it's leading us astray. It means we buy goods we don't need, we buy expensive brands without considering cheaper alternatives, and we miss the cheapest deals. If you ditch the habits and make a proper shopping list, you'll be amazed at how much money you save.
4. Ignoring bills
When things get on top of us, it's easy to put them off and try to ignore the bills we cannot afford. However, this is literally storing problems up for the future. Even if you run short of cash, you need to understand where you stand, and sensibly prioritise your spending. If you've made a budget this all becomes far easier - and it should help stop this problem arising in the first place.
5. Leaving things to the last minute and paying more
It's easy to resign ourselves to the fact that we're not naturally the type of person to plan ahead, but even the most scatterbrained of us can learn how to plan. There's never any need to show up at a station without a ticket, or desperately hunt for a hotel on the night before a trip. You know these things are coming, so six weeks in advance you should be hunting down the cheapest deals, so you pay far less for almost everything.
6. Blaming your income
When so many of us are strapped for cash, and we've seen our spending power gradually eroded by inflation and stagnant wages, it's easy to place the blame on our income, and wash our hands of responsibility. But clearly this isn't a long-term strategy, and there comes a time when we all need to accept our circumstances and find a way to work with them.
7. Automatic renewal
The temptation to do nothing is always powerful, but if you let your insurance, mobile phone and media contracts automatically renew, you are missing out on the opportunity to save hundreds of pounds a year. Set aside time to compare deals, and once you've saved your first £200, it might start to seem less like a chore to be avoided.
8. Assuming everything is the same
One of the most common excuses for failing to shop around is that there's no point - every company is really just the same. This couldn't be further from the truth. There are far cheaper options, there are organisations with fantastic customer service, there are also businesses with an ethos you can respect. All you need to do is look.
9. Using retail cards to get the discount
A number of stores will give you a discount off your first purchase if you sign up for a store card, but it's a slippery slope. For every person who pays off an high interest card in full in the first month, and then never touches the card again, there are plenty more who end up racking up more purchases and carrying the debt for so long that the initial discount is easily wiped out.
Even if you use these cards wisely, consider their effect on your credit score. Applying for any of these cards leaves a mark on your credit record, and too many cards will worry lenders if you come to apply for a credit card or loan.
10. Thinking of credit cards as free money
It's essential not to get sucked into thinking that your credit limit is your own money - but it's surprisingly easy to start thinking that way. With every penny you spend on credit, you need to have in mind that you are spending someone else's money, and you'll need to pay it back. Otherwise, it's easy to get carried away with your 'free money'.
11. Using credit to pay bills
When you have credit available on your card, and you're running low on funds, it's easy to think that maybe just once, you can pay your bills with your credit card. However, the experts warn that this is the thin end of the wedge. Once you put just one bill onto credit you'll spend more of your income paying off your credit card, you'll have less and less to spend on new bills as they come in, and there's a risk you keep going back to your card until you build up a significant headache.
12. Making minimum repayments
There are instances when making a minimum payment on your credit card is the only option you have. However, you shouldn't ever let this become a habit, because carrying a debt on a high interest credit card can cost more than you think. If you regularly have outstanding debt that you are struggling to pay down, you need to find an alternative card or loan which will help you spend less on interest and more on paying the debt off.
13. Chasing teaser rates then neglecting to move
In a burst of enthusiasm, many of us will move to a credit card or savings account offering a short-term bonus rate, promising ourselves that after a few months, when the bonus is withdrawn, we'll move our money again.
The problem is that we don't always have the enthusiasm for the second move - and in the case of credit cards we may not qualify for the cards we want to move to - so we end up stuck for months on an unattractive rate. If you have a history of sluggishness when it comes to chasing teaser rates, you may be better steering clear of them altogether.
14. Procrastinating about forward planning
The big expensive life events (like retirement) may seem too far away to worry about. If you have a decade or two to go until you need the money, then it's easy to let it slip to the bottom of your to-do list. However, by far the best time to start saving for your retirement is in your 20s, when you can put aside an affordable chunk of your income and still retire on a comfortable pension. If you keep putting this off until your 40s or 50s. you'll end up with a far more stretching savings target each month.
15. Taking a 'once and done' approach to saving and investing
When you finally get round to selecting the right savings or investments for your needs, it's easy to put it to the back of your mind for the foreseeable future. However, it's vital to take stock regularly. You need to be sure that the savings or funds that you have chosen still meet your needs, and that they are performing as you are expecting. If you don't revisit them at least once a year, you run the risk of a nasty surprise when you eventually come to get your hands on the cash.
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