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Originally Posted On: https://mymoneycottage.com/9-money-mistakes-you-must-absolutely-avoid-making/

It’s no secret that money makes the world go around. You need it to survive, but the only way to get money regularly is by working for it. When you have money, and you’ve paid your monthly expenses, you have cash spare to spend on whatever you want.

The trouble is, some people are either complacent or extravagant with their spare money, and soon they end up with no extra cash at all. In severe cases, a few of those individuals may end up with debt problems that spiral out of control.

If you want to be savvy with your money and avoid having a financial crisis, it’s worth learning about the following common money mistakes many people make so you can avoid them:

1. Spending More Than Your Disposable Income

The first thing you should do, and it’s perhaps an obvious point to make, is avoid spending more than your disposable income allows.

Don’t spend all of your spare cash and borrow money to cover any shortfalls for impromptu purchases once you’ve paid for your monthly expenses. Always keep control of the money that goes into and out of your bank account.

Online banking apps can help you figure out what you earn and what you need to pay each month.

2. Borrowing Money From High-Interest Sources

Let’s say that you need to borrow money to pay for an expensive purchase like a car or home improvements. It can be tempting to apply for an overdraft or access a line of credit from sources like Safety Net Credit. However, those are bad ideas.

Instead, it makes sense to thoroughly investigate sources of low-interest borrowing that you are eligible to access. For instance, you could consider a peer-to-peer funded unsecured loan that offers low interest rates.

3. Being Loyal to Insurance Companies

Did you know that some folks believe loyalty to an insurance company will get rewarded with discounted renewal fees? Sadly, the opposite is almost always true.

It’s a well-known fact that car and home insurance companies will seldom give you a better rate than new customers. The good news is the law now says that car and home insurance firms can no longer do that as of 2022.

However, that doesn’t apply to other forms of insurance. In any event, you should always check if you can get a better deal on your insurance policies elsewhere.

4. Ignoring Your Credit Status

In the UK, as is the case in many nations worldwide, lenders carry out credit checks on people applying for finance to help them assess eligibility. If you miss payments on existing borrowing, that information gets recorded on your credit files.

Similarly, if someone commits ID fraud and uses your details to borrow money and doesn’t pay it back, that too gets recorded against your credit files. As you can imagine, those things can negatively impact your chances of getting credit in the future.

Consider checking your credit files periodically so you can get a grip on what gets recorded and if you need to correct any mistakes.

5. Not Keeping Track of Your Spending

The first point in this article mentions how you could get into trouble by spending more than your disposable income allows. Do you know how much you spend each month, what you buy, and when those payments come out of your bank account?

If the answer to that question is no, you need to start keeping track of your spending. You can download an app like Emma to help you budget and manage your money easily. Alternatively, you could use a spreadsheet on something like Google Sheets.

6. Buying Groceries Without Making a List

One problem of going to a supermarket and doing your weekly grocery shopping without a list is that a) you’ll probably forget the things you need and b) you’ll buy lots of stuff on impulse.

Supermarkets always have special offers on products, and the clever marketing they use can entice people to buy those items – even if they don’t actually need them. That’s why you should never go grocery shopping unless you go armed with a shopping list first.

7. Not Taking Advantage of Benefits

Some people on a low income, for example, might be entitled to claim certain state benefits, such as Universal Credit. If you’re unable to obtain better-paid employment or your job choices are limited for whatever reason, it’s worth checking which benefits you can claim.

Websites like EntitledTo will ask a series of questions about your personal situation to determine if you’re eligible for benefits and, if so, which ones you are likely to get (along with how much you could potentially receive each month).

Some benefits are automatic, such as child benefit if you have one or more children and the state pension when you reach a certain age. However, others like Universal Credit are not automatic, and you need to check your eligibility before applying.

8. Not Saving Any Money Each Month

No one knows what might happen to them in the future. Sudden changes in a person’s life could cripple them financially, so it’s always worth planning for the unexpected by saving some money each month.

The amount you save will depend on how much you earn and the disposable income available to you. If you have a set figure in mind, but you currently cannot achieve it, you should look at ways to boost your income.

You could do so by getting a second job or perhaps having a sideline that you run from home, such as an online-based business.

9. Getting Vehicles Maintained at Main Dealers

One final mistake you should avoid if you own a car or van is avoiding main dealers for your maintenance needs. The prices they charge are high, especially labour rates, and you could be paying a fortune for work that can get done at a fraction of the cost elsewhere.

Investigate local independent garages and choose one local to you that offers good workmanship and uses high-quality parts.