Internally, we call these “schoolboy errors” the magnificent seven and see people making these mistakes time and time again. Make sure you’re not one of them.
1: Paying the minimum payment on your credit card
Some credit cards allow you to pay 1% of your balance plus interest, or £5 per month, whichever the higher. This can be tempting for the inexperienced especially if you owe thousands. But consistently paying the minimum on your credit card is a terrible mistake. In an example shown on Sterling & Law’s website, someone took 29 years to pay off a £3,000 bill by paying the minimum and paid £4,000 in interest alone whilst they were at it!
2: Not joining your employer’s pension scheme.
Companies often give you free money by matching your contributions to their pension scheme. Yet many employees fail to realise this and reject joining for a number of reasons, the most common one being that they don’t anticipate being at the firm for long. Typically, these employees stay much longer than anticipated, sometimes for many years.
3: Habitually paying bills late.
Waiting until you get a red letter might seem like a cunning idea until you realise what it does to your credit score. These days, your credit score is more important than ever. More and more employers check the credit scores of new applicants as a measure of their dependability. A poor credit score could not only prevent you from buying your dream home, it could cost you your dream job.
4: Thinking you’re smarter than the professionals.
There are many websites available for the DIY investor and standard practice is to list the top five performing funds over the last 12 months. Armed with this information, the novice investor puts their cash into these funds with little regard for risk, asset allocation or diversity. Poor performance usually follows and by the time they have spoken to a financial adviser, the damage has already been done.
5: Shunning insurance.
Insurance is a great thing – when you need it. There are different types of insurance. Home, automobile, and life are just three of the various kinds of insurance policies that are available. Insurance, of all kinds, is used to help protect people when certain things happen. For the most part, this protection comes in the form of money. It can also provide protection from liability, damages, and financial loss. But you get what you pay for and going for the cheapest option can often be an expensive mistake.
6: Always going for the cheapest option.
You don’t walk into a fast food restaurant expecting the same kind of service or quality you’d get at a 5-star restaurant. On the flip side, you don’t go to a 5-star restaurant looking for an extra-value meal. The same thing holds true when selecting a life insurance company. The level of service, the company’s financial strength, flexibility of products, and other attributes may increase the price, but ultimately increase the value of your policy and make it a smart purchase.
7: Refusing to take advice.
Some financial decisions may appear complex whereas others may appear simple. It’s always worth taking advice, even for what may appear simple. The reason for this is that apart from getting a valuable second option from a professional, financial advice comes with the all the protection provided by the financial services regulator, the Financial Conduct Authority. Worth paying for? I certainly think so.