The Scotsman has ten common financial mistakes that people make. Of the ten, my ‘favourites’ are:
- Failing to understand credit card interest rates – 80% of cardholders do not know what rate they are paying or think they are paying a lower rate than they really are. But let’s face it, with about 14 different ways of displaying credit card rates, it’s hard for anyone to understand what’s going on with their cards, and how theirs compare to the mountains of others available.
- Not reading the fine-detail of the policy – this is particularly a problem with insurance policies, when people think they are receiving “like-for-like” cover, and base their choice soley on the cheapest premium. Ensure that the policies you are comparing include exactly the same cover, or that the policy you buy provides the level of cover you need, by reading all the literature, or if in doubt, check directly with your broker or the provider.
- Failing to compare lenders’ fees and penalties – headline rates are just that, only the headline. What’s hidden in the rest of the text (see above) might let on that the policy is not as good as you might think, and there may be penalties for early redemption etc.
- Investing by following others – a fairly simple rule of investing is that if you follow others into an investment, you’ve probably already missed its best returns. You can also leave yourself with a very unbalanced portfolio if you chase the most fashionable investments, rather than looking at your own overall situation.
- Taking car finance from a motor dealer – just a great big “no no”, as there’s currently a bit of a personal loan war going on, making them far cheaper than the finance you’ll receive through your car dealer.
- Failing to shop around – the internet has simplified the process for getting comparisons on financial products to that point that it’s almost unforgivable not to shop around for the cheapest deals.