Don't let your money go up in smoke by making these common mistakes.
As Bonfire Night approaches we take a look at how you could be burning through your hard-earned cash at record speed simply by having the wrong financial products.
Plus, if you fail to protect yourself and your family there could be fireworks further down the line.
But it's not too late to get financially savvy and save hundreds of pounds. By following some simple steps you can save more, pay less interest and generally have more money to spend on the things you get fired up about.
Getting your fingers burnt
Many customers get their fingers burnt financially because of not reading the small print properly. This is especially common with credit cards, where late payment charges can cost you a packet and be easily avoided if you know what to do -- setting up a direct debit to cover the minimum payment on the right day of the month is one easy step.
It's also important to understand how your provider applies your repayments to your credit card account, as this can make a real difference to the interest you pay. Many use 'negative payment hierarchy', a practice the Government wants to stamp out, but it exists right now and is explained in detail in Don't fall for this card trick!
Failure to take cover!
As people up and down the country go out to celebrate Bonfire Night, homes are left empty and burglars are ready to take advantage of the loud bangs and dark nights to shield their crimes. Ensure your property is fully secure, and check your buildings and contents insurance policy is up-to-date and sufficient.
Not only is the risk of burglary increased there is also the prospect of accidental damage from a flying firework.
Forgetting to 'burn' your financial documents
'Build a bonfire, Build a bonfire, put your statements on the top'. OK so maybe a shredder is a bit easier and safer, but it's essential that when you decide to dispose of your financial documents you destroy them properly.
If not, you leave yourself open to ID fraud from those who steal bank statements from rubbish bins to create a false identity and apply for loans -- in your name! It may sound far-fetched but it's not just celebs that get their bins raided -- ID fraud costs the UK economy an estimated £1.7bn a year and affects over 100,000 victims.
Exposure to rocketing rates
With interest rates at the lowest they have ever been many borrowers are enjoying super-low mortgage repayments. All well and good, and the extra cash is no doubt welcome. But the problem for those on a variable rate is that when interest rates rise, so will your mortgage repayments.
And the rises could be sky-high since there is no cap on how many increases the Bank of England can make. One way around this is to get a medium- to long-term fixed rate mortgage to ensure you are fully protected from rocketing rates. But of course, you will pay more in the short term as they are not currently cheap. An alternative is to continue with your low variable rate but put any extra cash into a savings account in preparation for the impending payment shock.
Falling for the sparklers
A sparkling savings account definitely attracts attention, especially those that top the best buy charts. But the problem with these sparklers is that they can fizzle out and many current headline-grabbing deals come with massive year one bonuses that end after the 12th month. Then you are left with a rate that is mediocre at best and crummy at worst.
In fact, recent research* shows that one in five of all savings accounts now include a bonus. This is fine for those who are happy to switch their savings each year but what about those of us who just want long-term good value. According to financial information provider Moneyfacts, building societies provide the most consistently high-paying savings accounts, with Bath Building Society and Birmingham Midshires the best overall.
Remember, remember the 6th April ISA deadline
Too many people neglect to make the most of their annual tax-free ISA allowance, which enables you to save up to £3,600 in cash each year, rising to £5,100 from 6th April 2010 (or already for the over-50s).
By saving into an ISA, you shield more of your money from the taxman, which is especially useful for higher rate taxpayers who otherwise have to pay a whopping 40% on their interest earned. A 3% cash ISA rate for example is the equivalent of a 4% taxable rate for 20% taxpayers, and a 5% rate for 40% taxpayers.
Fanning the flames of debt
If you have financial problems or are worried about debt, talk to your providers. Burying your head in the sand really makes things worse. By contacting your mortgage lender early they can work with you to devise a payment plan you can manage.
You will feel better knowing that you have an agreed plan in place until you get back on your feet financially. If your debt problems are more serious, seek independent specialist help. Watch this video for more help or adopt this goal: Destroy your debt.
Letting your money go up in smoke
There are many invaluable financial products and some compulsory ones. But some products may be unnecessary if they are designed for certain people, or there are cheaper, better alternatives.
For example, life insurance is recommended for all parents, but if you are a single homeowner you might decide it's not necessary, and save yourself a few bob. Payment Protection Insurance, packaged current accounts and some types of health cover are all products that you should think carefully about and seek advice if you are not sure if they are right for you.
Get help from lovemoney.com
If you need help managing your money use our resources.
First, adopt this goal: Five ways to destroy your debt
Next, watch this video: The biggest financial rip-offs
And finally, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?
*research by Moneyexpert.com
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