There are already enough scares to be had around Halloween, so make sure there aren’t any shocks in store for you and your finances.
Sometimes, financial mistakes can be small in nature but long-lasting in their effect, which makes avoiding them an important task.
Read on to discover five scary, financial mistakes to avoid this Halloween.
1. Not making a will
According to Today’s Wills & Probate, only 4 in 10 UK adults have written their will. From this figure, it’s clear to see that writing a will is a low priority for many people across the country.
However, despite so few people seeing the necessity, it could prove a vital way to protect your finances after you’ve passed away.
Having a legally binding document to stipulate exactly how your estate is divided can prevent your assets from going to parties you don’t intend to gift to. More importantly, it can be a way to ensure the people most important to you receive what they deserve.
By creating a will, you can distribute your possessions in as detailed manner as you please. This could mean accounting for every last one of your possessions, fractionalising physical items, or directing specific investments to a certain person.
Will Aid Month falls in November – a month where many solicitors waive their fees for writing wills in favour of a charitable donation – and could be the necessary incentive to get yours written.
Note that the Financial Conduct Authority does not regulate wills or estate planning.
2. Not informing your pension provider of changes
As you recently read, managing your pensions with the appropriate attention is a great way to stay on top of your finances.
It’s all too easy to lose track of a pension, especially when something as simple as moving house could suspend your access to your pot.
On top of this, should any of your personal details change – such as your name, telephone number, or address – you will need to get in touch with your provider to ensure you don’t lose correspondence with them. If this happens, you could lose access to your pension pot.
It can be good advice to remain in fluid correspondence with your pension provider regarding your life events or changes in order to avoid any nasty surprises.
3. Prioritising the wrong debt
If you have multiple debts, it can be difficult to decide which you should address first.
Before making an arbitrary decision on which debt to pay first, it’s helpful to understand that prioritising the wrong debt can have adverse effects on your finances. It could make your situation worse and, if other debts accrue interest faster, it could leave you struggling with high interest costs.
Prioritising high interest debts before others can help to minimise the amount you pay over the long term.
Personal loans and credit cards are two examples of repayments that could involve high interest rates. You should consider settling these debts before any others that don’t have such long-term consequences.
4. Not securing your financial position
Having a comfortable financial position is a great place to be.
However, adopting a mindset of “hope for the best, prepare for the worst” could further reassure your position. Putting safeguards in place for whenever unexpected events arise could save you from an unpleasant time.
An emergency fund
One of the most straightforward ways of doing this is to create an emergency cash reserve in anticipation of a financial shock.
It’s important not to consider yourself as immune to this type of risk as it can occur in different forms. Some examples are unexpected bills or expenses such as housework, car troubles, or even natural causes like extreme weather.
While you may think that some of these types of events aren’t likely to affect you, the moral of the story is acknowledging that, even if you feel secure, one unfortunate event could change that.
So, being prepared with an emergency fund to cover your usual costs in a case of crisis could prevent you from dipping into investments or turning to high interest debt.
Shielding your source of income is another good way to safeguard your overall financial position.
If you’re rendered unable to work through injury, or illness, then you could be left in a vulnerable position with expenses that need to be paid regardless of this.
Income protection is paid in periodic instalments and will cover some of your income – usually between 55% and 65% of your income – should you be unable to work. As well as this, you will continue to receive payment until you recover, subject to the specific terms and conditions of your policy.
Critical illness cover
Should you suffer from many of the types of serious ailments covered under critical illness cover protection, you’ll receive a tax-free lump sum.
Conditions covered include heart attacks, strokes, and some types of cancer. It’s important to check your policy definitions to be sure of what conditions are covered.
This financial support can ensure you’re not worrying about your finances, allowing you to focus on your recovery.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
5. Not making the most of your Individual Savings Account (ISA)
ISAs can be a practical, tax-efficient way to build savings – so it could be a mistake not taking advantage of their benefits.
One of the reasons you should consider using an ISA to store your savings is that any returns are paid free of Income Tax and Capital Gains Tax.
Lifetime ISAs (LISA) could also be a great savings account to take advantage of, if you’re aged between 18 and 39 and you are saving for the deposit for your first home or your retirement.
With a LISA, you may be eligible to receive a 25% bonus on your deposits in the form of government contributions.
Since the annual allowance of a LISA is £4,000, you could receive up to £1,000 extra from the government into your savings account each year by depositing the maximum allowance. Even better, you will receive the 25% bonus every year that you make a deposit into the account, until the age of 50.
You should note that, unless you use the funds to purchase your first house or are aged 60 and above, early withdrawals usually incur a 25% penalty.
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We can help you avoid easy financial mistakes while appropriately preparing your finances for any rainy days you may encounter.
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This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.