Money mistakes I wish I hadn't made
When I first told my friends and family that I was going to become a personal finance journalist, most of them thought it was an elaborate joke.
It certainly seemed unlikely that I – a self-confessed shopaholic with no history of saving – should even be interested in money, let alone qualified to write about it.
In my youth I'd prioritised building up a sizeable shoe collection over balancing my budget, and my spending habits had got me into a few scary situations.
Now I'd like to share my most serious money slip-ups with you, in the hope you can learn from my mistakes.
1. I believed a 0% overdraft was ‘free money'
When I was a university student of 18, three ideas dominated my belief system. They were:
a) Student loans are not real debt;
b) A 0% overdraft is free money; and
c) Beer is best drunk mixed with cider and blackcurrant*.
About the first, I was almost right. Because student loans are charged at an interest rate equivalent to inflation, they don't cost students anything in ‘real' terms.
Sadly, my second core belief was total rubbish.
Like many students, I spent my way through around £2,000 of my bank's money – and it never occurred to me that, at some stage, they might quite like it back.
What's more, the thought that I would eventually be charged interest on my overdraft (which had largely been spent on booze, rather than books) didn't enter my head.
I was mortified when, after graduating, I had to start paying interest on my outstanding overdraft balance – and even more miffed that they expected me to repay the debt within 12 months!
Avoid this money mistake: Only enter your overdraft for spending on things you absolutely need, and ensure that you properly plan to repay whatever you have borrowed – even if your overdraft rate is currently set at 0%.
If you've already made it: See if you can grab a 0% overdraft deal, which will help you pay down your debt faster and save you money. The Alliance & Leicester Premier Direct Account typically comes with a 0% overdraft, fixed for 12 months.
2. I didn't budget properly
To keep control of your finances, it's crucial that you know how much money you have coming in and going out each month – and exactly what you're spending it on.
At one stage, I couldn't be sure about any of these things. As a result, I was constantly stressed and found my bank account ran dry far more frequently than I could replenish it.
This led me back into the arms of my dreaded overdraft – and onto unwise experimentation with credit cards.
Avoid this money mistake: Keep a spending diary for a few weeks to track where your cash is going. Then make cut-backs where necessary, make a plan for your monthly spending and stick to it!
If you've already made it: Make a budget that incorporates any debt repayments you need to make.
Next, plan to pay off your borrowing as quickly and cheaply as possible. A 0% balance transfer card could be a useful tool in the fight to ditch your debts for less.
3. I borrowed on expensive credit cards
When I first began to use a credit card, I'm ashamed to say I did so without thinking about how much I'd be charged for borrowing or how long it might take me to repay my debt.
The result? I paid hundreds of pounds in interest for the privilege of buying things that, quite frankly, I should have just saved up for.
Plastic can be fantastic if used wisely, but making mistakes with credit cards could cost your serious money and eventually cause real heartache.
Lucky for me, I managed to rein in my spending and learn these five important lessons about credit cards before it was too late.
Avoid this money mistake: If you must borrow, do so as cheaply as possible.
A 0% purchases card will allow you to spread the cost of spending at no charge, as long as you repay everything you owe within the 0% period on offer.
If you've already made it: Consider using a 0% balance transfer credit card such as the Virgin Credit Card to demolish the rate of interest you're paying on your debts.
If you have sizeable balances, a long term, low rate deal might be more suitable for you.
4. I started to save while still in debt
Saving is a great idea if you can afford to put some money aside each month.
The only time it makes less sense is when you're still tackling expensive debts. Sadly, this is another financial faux-pas I made in the years before I became a money journalist.
While I was paying upwards of 16% on credit card debts, I was faithfully squirreling away more than £100 a month into an ISA paying 4%.
I believed I was doing the right thing at the time – but it doesn't take a genius to work out that because I was paying out more in interest charges than I could ever hope to earn back on my savings, I wasn't making the most of my money.
In fact, by not throwing every spare penny I had at my credit card balance, I was prolonging the length of time I'd spend in debt – and how much that debt would cost me.
Avoid this money mistake: If you have debts, consider paying them off as quickly and cheaply as you can before starting to save.
If you've already made it: Sit down and work out how much better off you'd be each year if you used your savings to clear the debts you have.
I know from experience that it can be an emotional wrench to splurge your cash cushion on debt repayments, but it does make mathematical sense.
* This belief had significant repercussions, not all of them financial.
**Articles featured on BeatThatQuote.com are for information purposes only and reflect the views of individual writers. Articles are not, and should not be considered as, financial advice. BeatThatQuote.com strongly encourages our readers not to rely solely on information contained within this article/our website, but to conduct their own research and seek independent advice about the financial products they purchase.**
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