Halloween was originally an ancient Celtic festival called “Samhain” that was celebrated to ward off any ghosts on their trip to the afterworld.
Despite being an ancient tradition, Halloween is still massively popular today – Statista forecasts that Halloween retail expenditure in 2022 in the UK could reach as much as £687 million.
While you may get into the Halloween mood by scaring yourself with spooky films, there are also some financial mistakes that can make your blood run cold.
So, forget ghosts and ghouls; here are five frightening financial fumbles that are enough to send a chill down your spine.
1. Not having an emergency fund
When it comes to your finances, being prepared for the unexpected is paramount. For example, if your car broke down would you have the disposable cash to have it fixed? Or, if you lost your job, would you be able to support your family until you managed to find new employment?
All of this, and more, can be prepared for with an emergency fund.
Simply put, an emergency fund is a pot of money you have saved for a rainy day and is designed to be used to cover any unexpected financial scenarios that may arise.
You should ideally save up to three to six months’ worth of monthly household expenses in your emergency fund. However, if you are self-employed, or have a large family, you may want to consider saving even more.
And, since this money will need to be accessed easily and instantaneously, you should ideally keep it in an easy access savings account.
Thankfully, This is Money reports that around three-quarters of Brits have an emergency fund. If you’re not one of these people, then never fear – you simply need to start making regular monthly contributions that you can afford and build up to the amount you wish to save.
2. Not making the most of your ISA allowance
ISAs allow you to build up savings in a tax-efficient way, so not making the most of them is the second scary mistake on this list.
ISAs allow you to save and invest your money free from Income Tax and Capital Gains Tax (CGT).
Some ISAs are even purpose-built for certain situations. Take the Lifetime ISA, for example – these allow 18- to 39-year-olds to deposit up to £4,000 every tax year, and the government will add a 25% bonus for contributions up to the value of £1,000 each year.
You should ideally use your ISA allowance each year if you’re to make the most of the tax efficiency on offer to you. In the 2022/23 tax year, the yearly ISA allowance stands at £20,000, and this is spread across all different types of accounts.
If you don’t use your ISA allowance, then it’s gone; it doesn’t carry over to the next year.
3. Failing to plan for your retirement
No matter how young you are, it’s never too soon to start planning for your retirement. While you may think it more prudent to be worried about the current economic climate, it’s still important to look to the future.
Long before you’ve reached your retirement, you should think about what you want to do with your well-deserved time to relax. You might want to spend your days lounging on a beach in Spain, or simply wish to support your family.
Whatever you want to do when you retire, you’ll need to save enough money to live comfortably.
When you know how much money you need to live your desired lifestyle, you can then figure out how to effectively save.
If you don’t properly plan for retirement, you could run the risk of not being able to live the life you’ve always wanted when you stop working. After all, when you fail to prepare, you’re preparing to fail.
4. Remaining on your lender’s standard variable rate
Another hair-raising financial mistake, this time for those with a mortgage, is staying on your lender’s standard variable rate (SVR).
If you’re on a fixed-, discounted variable- or tracker-rate mortgage, your deal will eventually expire. When this happens, you will typically revert to your lender’s SVR.
This may not sound so scary at first, but the interest rates offered by these SVRs are usually quite uncompetitive compared to other deals in the marketplace.
So, in an ideal world, you should avoid remaining on your lender’s SVR for long periods of time, or you could end up out of pocket.
Indeed, you could save a significant sum by switching from your lender’s SVR. The MoneySavingExpert states that 370,000 borrowers could save £1,250 a year on average over a two-year period if they were to switch from their lender’s SVR.
The good news is switching is relatively simple, especially when you seek the help of a professional. Mortgage brokers can scour the market for you to find you the best deal, and they even have access to exclusive deals not available on the high street.
5. Working with a professional can help you avoid making financial mistakes
As you can see from this list, there’s a plethora of different mistakes that can be made when you’re managing your finances.
The good news is that enlisting the help of a professional can help you to manage your money and avoid any critical blunders.
We can help you make the most of your pension and ISA allowances each year, help you avoid paying excess tax on your savings, advise you on the best way to manage your money and save for your emergency fund, and more.
Working with professionals like us won’t just make managing your finances easier, but it can also lift a weight off your shoulders by reducing the stress and hassle of understanding your money and long-term financial future.
Get in touch
The world of personal finance can get frightening at times, so we can help you manage your money to alleviate some of the fear involved. If you would like to find out more, please email hello@bluewealth.co.uk or call us on 0117 332 0230.
Please note
The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Think carefully before securing other debts against your home.
Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.
