At its most fundamental, finance is the simplest thing to understand and the easiest to manage: you need to earn more than you spend in order to live a modern life and to provide you and your family with the security.
So why is that so many people get into trouble when it comes to money. Leaving aside those who are out of work or disabled, hundreds of thousands of people struggle with the finances – running up debts, spending more than they earn and mortgaging their futures. Millions more have not put enough aside for retirement and while they may be enjoying the good times now, will inevitably face a reckoning when the wage slips stop rolling in.
I made all of the most common mistakes and kept making them over and over again. Through forums and online financial advice sites, I found that I was in good company with people from all walks of life and earning vastly more money than me all doing the same things:
Taking on debt too early & Not saving for retirement
The pressure on young people today is immense: peers, advertising and social media all glorify lifestyles that are unattainable before you start earning a reasonable amount of money. Credit was easy to come by when I started work and I thought I could have everything. It was ruinous eventually. Until you’ve started earning a reasonable wage and have money left over each month, it’s unwise to start borrowing too soon.
When I was 40, old age still seemed like something that happened to other people. But now I’m 55 and have not saved a penny for my retirement which could be just a decade away. Your prime working years race by and, before you know it, you’re facing retirement through age or ill health. Not having enough money in a pension can impoverish you so start planning for your retirement as early as possible.
Not maintaining a decent credit record
Being reckless with money didn’t just affect my ability to borrow more – it stopped me getting a mobile phone contract, a mortgage, a tenancy agreement, even an electricity or landline connection. Always pay your bills on time.
Not setting a household budget
Watch the pennies and the pounds will look after themselves. Sounds trite but it is an age-old wisdom. Keeping track of your family’s outgoings, setting boundaries and sticking to them will ensure that you never spend more than you earn.
Not applying the brakes
When the warnings are flashing red, I needed to take a fundamental look at my financial affairs. I was behind on repayments and had defaults registered against me but just kept taking on more debt. I should have talked to a debt charity or the Citizens Advice Bureau.
If you’ve got a lot of credit cards and loan accounts and the interest is threatening to send you over the edge, you should seriously consider rolling them all into a single debt consolidation loan and pay a single monthly repayment and interest rate. It will allow you to budget more accurately and with greater confidence.
Sticking my head in the sand
I’m a great one for pretending all is well when it patently isn’t. I spent years ignoring warning letters and not opening mail in windowed brown envelopes. Always be realistic about your situation and open and respond to letters from your creditors.
Not having a contingency fund
I used to be paid on the 15th of the month. By the 30th, my bank account was empty and I would eke out an existence for the next fortnight until payday. Then, one day, the cam belt went on my car, meaning an engine rebuild and a bill for £2,000. I had no contingency for this and had to scrap the car. Always ensure you’ve got some money put aside for the emergencies which inevitably will happen.
Maxing out my credit cards
I behaved as if my credit card limits were additions to my wage using them to buy new televisions, the latest consumer gadgets, smartphones and so on. Then, they were maxed out and I had bills rolling in which I couldn’t afford.
Only ever making minimum payments
Those credit card bills mounted up because I only ever made the minimum monthly repayment and so the balances went down by minute amounts while the interest kept rolling in. Always try to make more than the minimum payments on your cards to reduce the actual capital amounts and, thus, interest.
Focusing on months, not years
Just living payday to payday was fine in the short term but disastrous over a longer timescale. It meant that I never put money aside as savings or simply for a rainy day and had nothing left over when I lost my job. Project your budget forward a year, two years, maybe more, and plan ahead.
Not setting goals
Maybe you are like me and have spent years just stumbling through life. If you aim low, you’re guaranteed to hit the mark. But if you set your financial goals and review and update them regularly, you’re much more likely to have a less stressful life.
Believing that stuff makes you popular
I bought everything that I thought would make me more attractive: designer clothes, watches, cars. This spending year on year left me both broke and feeling empty. Real relationships and friendships are built on fundamentals not material possessions. It remains true that you cannot buy a friendship or partner.
Keeping up with the Joneses
I hated it when my friends bought expensive new cars. I thought that I had to do the same just to be able to be accepted in the same social circles. It was disastrous and led me into terrible debt. If your friends are so shallow that they would shun you if you didn’t drive a new car, then you need new friends… not a new car.
Thinking that I couldn’t change
I deeply regret the years I wasted thinking that there was no point making financial changes because it was too late. It is never too late to budget, to cut back and to start to repair your credit record.