When it comes to financial planning there are more than a handful of mistakes which are repeated over and over.

Whether you’re a prince or a pauper, to have a secure and preferably comfortable future, it’s time to get serious and face up to the financial planning mistakes you do not want to be making. Here are some of the most common financial planning mistakes that you will want to avoid:

Impulse buying

How many times have you wandered by the stores only for something to catch your eye and you suddenly decide that you need it, can’t live without it and will most certainly suffer if you don’t have it right now? And how much does it cost you when this happens because, most certainly, you haven’t planned for this purchase, haven’t budgeted for it and don’t even know if you can really afford it.

Having too much credit

Okay, so having too much available credit isn’t actually the issue. It’s using all the credit that is available to you that is. Maxing out credit cards, store cards, turning to loans and finance agreements doesn’t bode well for a comfortable present, let alone a comfortable future. What purchases are you actually filling the credit cards up with? Is it anything to do with the first thing on our list, by any chance – even sometimes?

Paying high interest rates

As if being used to whacking every purchase on the credit cards isn’t enough, do you actually know what the interest rates are on each one? Check it out and you might be shocked. If possible, see if you can get a card with a lower interest rate and carry out a balance transfer onto it. Make sure you continue making the same higher payments instead of decreasing the amount you pay in order to pay it off faster and don’t whatever you do treat your now-empty existing card as an opportunity to splurge afresh. Cut it up and get rid!

Making minimum payments

If you had an outstanding balance of £1000 on your credit card which had an interest rate of 14% APR and a minimum payment requirement of 2%, it would take you more than 19 years to pay it off and would cost you £1,123.91 in interest. Pay an extra £10 a month and it would be paid up in just over five years instead, with £763.25 less interest paid too.

Renting instead of buying

You don’t need to be a multi-property owning mogul but it doesn’t matter how you look at it, you’ll never get rich if you don’t at least buy your own property to live in. If you are paying rent for your home the only person whose pocket you are lining is the landlord’s.

Not planning for the future

We are often too busy living for now instead of planning for the future. We often know what we’d love to be doing, but do we actually make plans to realise those dreams? We always think we’ll begin next week, or month, or year. How often do we keep pushing our start date along?

Failing to keep track of spending

Do you know how much you spend month in, month out? What do your bills actually come to? How much are your total standing orders and direct debits? And how much do you really spend on food each time you shop? Keep a spending diary will open your eyes to how much money really goes out opposed to how much money you think goes out. The difference can be quite astounding.

Procrastinating instead of doing

If your motto is ‘Why do today what you can put off until tomorrow’, you might want to change your thinking pretty quick. Do you know how much money you’re wasting by putting off your savings plan? We’ll tell you.

If you invested £3000 a year for 8 years starting at the age of 19 and stopping at the age of 26 with a 10% annual return, you would have over £1,552,739 thanks to the magic of compound interest.

If, however, you didn’t begin saving your £3,000 a year until the age of 27, even if you paid it faithfully for the next 38 years until you retired at 65 your investment would only reach £1,324,777. By putting off getting your savings plan underway you’ll have less money, even though you had invested more into it.

Thinking your goals will meet themselves

You have plans. You have dreams. They won’t realise themselves. If you don’t focus on what you really want for your future, put plans into place to realise them and actually do what you need to do, all they’ll ever remain are dreams.

Consolidating loans without changing spending habits

Debt consolidation quite often fails to work as, as good as initial intentions are, some people just can’t resist that new zero balance on the credit cards and spend as if they don’t now have the additional loan repayment to make. Pretty soon they have double the debt and even less means to pay it back than they originally had. If you do decide to consolidate your loans make sure you cut up your cards, stop taking out new loans and easy finance plans and make a pledge to save before you buy anything again. Change your spending habits first and foremost – you need to break the cycle once and for all.

Failing to budget

When you fail to keep track of your spending alongside failing to keep track of your income, it’s pretty eye-opening to discover that you don’t actually balance your finances as well as you thought. Sit down, create a budget and find out exactly how much you have going out and coming in each month. Click here for a handy budget sheet template that you can print off and personalise.

Not having an emergency fund

Emergencies do happen and failing to prepare for the event won’t make it any less likely to happen. Even the smallest emergency fund of a couple of hundred pounds will make coping with a faulty appliance, a car breakdown or an unexpected bout of illness easier to deal with.

Thinking worst case scenarios won’t happen to you

Ignorance is anything but bliss when you find the main breadwinner unable to work for months, when you lose your job or when illness means your income suddenly stops. Too few of us plan for negative events and most of us don’t even have enough financially to see us through even a month or two without an income. What would happen to your family if the worst case scenario did occur? Perhaps it’s time to consider taking out extra cover for illness, loss of work or even loss of life so that you have peace of mind that your family will be taken care of should the worst happen?

Living champagne lifestyles on beer money incomes

It’s okay living like a millionaire if you are a millionaire, but try to life the life of Riley when you’re neck-deep in debt, juggling the credit cards and robbing Peter to pay Paul each month and the truth will soon catch up with you. Living a consumerist lifestyle you can’t afford doesn’t make you any more popular or likeable, but trying to maintain that lifestyle will see you making bigger purchases and spending more in order to keep the image going. Take stock of your situation and be honest with yourself, and make changes before it becomes too late.

Funding major purchases through debt instead of saving first

For some reason we are led to believe that it’s okay to buy now and worry about paying later. Credit is simple to get, repayments seem attractively low and manageable and so we don’t really need to wait for the things we want any longer. The problem is that car you’ve financed with the loan depreciates far faster than the rate it will take you to pay it off at. The result? An old banger in a few years which is worth very little, and a millstone of a car loan you still haven’t paid off.

Wasting money on fees and charges

Not knowing when your payments are due, not having enough money in your account to cover outgoings or simply not making payments at all result in late payment fees, unarranged overdraft fees and any other fee or fine your account providers or debtors see fit to charge you. Make a promise to yourself to never pay anyone any unnecessary fees or charges again.

Thinking retirement is too far off to worry about

Your idea of being organised is planning your Christmas card list by the middle of November but if you carry on putting off planning for your retirement, you will soon find yourself getting ready to retire with little to show for it. Start early and plan ahead. The time will go by quicker than you think!

Not checking the best savings rates

You might be giving yourself a pat on the back for getting your savings underway, but when was the last time you checked and compared the interest rate against others on the market? Every percentage makes a whole lot of difference in the long run. Make sure your money is working as well as it can for you.

Not having savings at all

If not, why not? No more excuses. Lots of financial institutions offer regular savings plans which you can maintain with as little as £10 a month. You don’t need to start big. You just need to start.

Not protecting your savings from the taxman

Oh, the taxman, bless his heart! He does love to share what we have, doesn’t he? Make sure your first port of call when it comes to savings is protecting as much as you can from the taxman by using up your ISA (or NISA) allowance.

Not paying off debt as quickly as you can

Imagine how much interest you’ll have paid out if you end up spending your entire life in debt. What else could you have done with that money? Pay off as much as you can, as quickly as you can and you can live the life you want sooner.

Relying too much on your current job

The days of working for one employer for your entire working life are long gone. No longer do we live in an age where we can rely on a lifetime job role, with regular, dependable pay cheques, pay rises and pensions. Rather than relying on your sole source of income, look into creating multiple passive income streams in addition. That way you won’t be totally reliant on any one form of income and, should something go wrong and you lose one, you still have several others to fall back on.

Failing to use discounts

If you shop online and don’t already use cashback sites to get money back on your purchases, you’re potentially losing out on hundreds of pounds worth of cash back in your pocket. Likewise, failing to invest a little time into looking for the best prices, shopping in sales or keeping an eye out on the latest deals can end up costing you dearly. Don’t forget to use discounts available for particular groups, pensioners or students for example. Make the most of the discounts you are entitled to and ensure you find out what’s on offer for you first, before you make your purchases.

Failing to add up the small spends

They might only be a pound here and fifty pence there, but small spends soon add up and form big amounts. Read this to see how much your little habit might be costing you.

Not treating yourself as a debtor

When we get paid we often make attempts to pay our bills and debts first, then think about putting a little away for ourselves if we have anything left at the end of the month. Often though, we find we have too much month left at the end of our money, so that little amount we were hoping to set aside never comes forth. Treat yourself as a debtor and pay yourself on pay day along with everyone else.

Not updating your financial plan when circumstances change

It’s great that you’ve created your financial plan and it’s fantastic that you’re putting the effort into following it, but do make sure you review it regularly to ensure it fits any change of circumstances you may have been through. If you’ve received a pay rise or paid off a debt, don’t overlook the extra money which you now have. Updating your financial plan and status regularly will keep you on top and ahead.

Not having a financial plan at all!

The first step to taking control of your money is knowing how much you have, how much you owe, how much you are spending and how to make your money work for you. You can’t do any of these things without a plan. All it takes is a little investment of your time and a healthy dose of determination. The sooner you create your financial plan, the sooner you can put it into action, and the sooner you can reap the rewards. So come on, what are you waiting for?

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