Common Money Mistakes and How to Address Them

Written by

Cara Bradley

5 min read

Updated: 05/04/2024

Very few of us are lucky enough to have our finances in perfect order, and it’s important to remember that this sometimes can be through no fault of our own.
Often, no matter how sensible we are with our money, influences outside of our control, such as redundancy, illness, or a relationship ending, can impact our financial situation. Sometimes, all it takes is one emergency expense to derail our careful plans. In this guide, Viva Money explores some common money mistakes and suggest ways that they can be turned around to get you back on track.
Whether you’re hoping to increase your savings or take control of your monthly subscription expenses, we’ve got your back.

1. Turning a blind eye to budgeting

It’s easy to hear the word ‘budgeting’ and stifle a yawn. We admit – it doesn’t always come across as the most thrilling of topics, but avoiding budgeting altogether could be having a negative effect on your finances.
Setting a monthly budget could help you manage your money, prevent you from relying on credit, and reduce the risk of spending what you don’t have.
The great news is that budgeting doesn’t have to be dull. In fact, once you get into the habit of budgeting, you could find that you start inadvertently looking for new little ways to save and increase the amount of money you have left at the end of the month.

So, how do you set a budget? It’s simple!

• Calculate your monthly income. This should include your wage (after tax), and any additional bonuses, grants, or benefits that you receive. The total amount is your overall budget, and this is what you’ve got to work with.
• Subtract your essential monthly outgoings – such as your mortgage, rent, bills, and food shopping - from the budget total.
• The sum you’re left with after essential deductions is your ‘disposable income.’ This can be saved or spent; however you choose.

Try not to feel disheartened if your calculations are a little out at first – budgeting takes time to get used to. However, with a bit of practise, budgeting could eventually become second nature.

Check out MoneyHelper’s free Budget Planner tool to kickstart your plans.

2. Not having savings

It is estimated that over 11 million people in the UK have less than £1,000 in savings.
According to NatWest, the general recommendation is to have at least three months’ living expenses saved in an emergency fund; however, it’s important not to beat yourself up if you have less than this.
We understand that saving money isn’t easy, especially during the cost-of-living crisis, but remember that any amount you can afford to put away is a good start.

Having a sum of money saved for a rainy day could be a safety net in the event of an unexpected financial emergency.

Let’s say your car breaks down and requires urgent repairs. You don’t have enough money to cover the cost upfront, and you don’t have any savings – what do you do?
In this instance, you might think about applying for a loan. When you take out a loan, the amount you have to pay back will include interest, meaning you will end up repaying more than you borrowed.
Having savings to cover an unexpected expense will eliminate interest fees and work out cheaper in the long run.

When it comes to saving, it can be easy to compare ourselves to those around us. We may also find ourselves feeling down when we hear about saving ‘ideals’ in the media or on our socials.
Your individual financial situation is unique to you. You shouldn’t feel under any pressure to save more money than you can afford, and your monthly savings shouldn’t leave you struggling to cover your necessary outgoings.

3. Paying for subscriptions you no longer use

Okay, hands up – who joined the gym in January?
Keep your hand up if you joined the gym in January and haven’t gone quite as much as you’d planned.
Absolutely no judgement from us, and you’re certainly not alone! Research has revealed that 67% of us let our gym memberships go to waste each year.
Paying for subscriptions and memberships that you’re not using eats away at your budget.
Take some time to go through your monthly expenditure and scrutinise the services you’re automatically paying for. This could be Spotify, Netflix, HelloFresh, or any one of the subscriptions you signed up for on a free trial and forgot to cancel.
Ask yourself when you last used these services, and how likely you are to use them again in the future.
Be realistic with yourself, bite the bullet, and cancel any that you no longer need. This is one of the simplest money saving techniques out there.
If, further down the line, you do get the gym bug again or you fancy a week of HelloFresh, you can always rejoin.

4. Making multiple credit applications

When you apply for credit – for example, a loan or a credit card – the lender or provider is required to carry out a hard search as part of the application process.
A hard credit search provides lenders with an insight into your financial history including how you’ve managed your previous credit commitments; they use this information when making a decision about your application.
Hard searches can remain on your credit file for up to 12 months and undergoing too many hard searches in a short space of time could lower your credit score.

5. Using your credit card to withdraw money

Using your credit card to withdraw money from a cash machine – known as a ‘cash advance’ - could be an expensive mistake.
You’ll probably be charged interest as well as a cash advance fee on the transaction. The cash advance fee may be a fixed amount set by your card provider or a percentage of the withdrawal amount.

6. Subconscious spending

Contactless payments make it easy for us to spend without much thought.
If tapping has the tendency to make you forget what you’ve spent, try to set five minutes aside each evening to go over your daily transactions and make a note of your new balance. This will also help you spot if there’s been any suspicious activity on your account.

Do you store your card details on your most-used websites in favour of a quick check-out? This is a common money mistake that many of us are guilty of. For an instant money saving tip, remove your details to reduce the temptation and ease of spending, as well as cutting your risk of falling victim to online fraud.

7. Getting into a spiral of debt

We’re sorry to end on the subject of debt. This isn’t a nice topic, and we hope that you never find yourself in this position, but if you’re ever struggling with your finances, please remember that help is always available. We’ll talk a little more about where you can turn for advice later, but first, here are a few things to remember before borrowing credit to avoid getting into debt:

• Explore other options before making a decision. Is borrowing from friends or family a possibility? Is your need for money urgent, or can you take some time to save up instead?
• You should never apply to borrow more money than you need or can afford to repay.
• If applying for a loan, be sure to choose a manageable repayment term.
• Ensure that you can comfortably afford your repayments.
• Be aware of the risks involved in defaulting on your repayments. Falling behind on or failing to make your credit repayments could lead to late fees and additional charges. Your credit score is also likely to suffer.

You can access free money management advice and debt help on sites such as Citizens Advice, MoneyHelper, and National Debtline.

You may also be interested in taking the Money Health Check quiz, which Viva Money have launched in partnership with debt charity StepChange. You can take the quiz online for free with no impact to your credit score. The answers you provide will remain confidential, and will generate advice based on your situation, and what you can do next.

8. Final thoughts

Many of us have made money mistakes at some point.
Perfecting our finances takes time and practise, but you may find that you’re rewarded with the confidence that comes through being in control of your finances. With careful budgeting, you may even see increase in the amount of money you have left at the end of the month.