Here are the top ten potential pitfalls of personal finance, courtesy of Harrington Brooks. These all pose a significant threat to your financial security and can each be noteworthy contributories to severe debt problems, which could lead to bankruptcy and even repossession of your home and other assets.
1. Beware of the extras that are on offer with your bank’s current account. Banks can charge up to £15 a month for these so called “package accounts”, which can incorporate things like travel insurance and breakdown cover. If you can take full advantage of these benefits, the account may seem worth the money. However, if you’re not actually going to use these extras then it’s a waste of money.
2. While renting electrical items like televisions may at first appear to be a good idea, they might not always be. It’s worth bearing in mind that renting, no-matter what it is, leaves you with nothing. It can also work out to be a lot more expensive. You could find that a few months of saving will actually allow you to just buy the appliance.
3. Mobile phone deals that offer free gifts, like laptops and games consoles, when you sign up to a contract have proven to be quite popular. However, savvy shoppers will read the small print of course, knowing that they could save hundreds of pounds over the term of the contract and could buy a better laptop elsewhere.
4. Investing can be fraught with problems and has resulted in many cases of bankruptcy over the years. If you are looking to invest, don’t buy directly from the fund management group as they’ll charge you a substantial fee, often up to 5 per cent, which will eat into your investment before you’ve even started. The same funds can be picked up cheaper through independent financial advisers or brokers.
5. Remember, a store card is just like a credit card but instead of charging about 17%, store cards will usually charge interest rates closer to 30%. Essentially, should you stay on top of your spending and pay off any outstanding debt before the end of the month, there will be no problem. However, paying 30% interest on your debt is going to make it hard to pay off.
6. Spreading the cost of your insurance premium over the year can incur interest rates of over 20%. So, if you can afford to pay it all at once, it’ll save you money. You just have to decide whether the convenience of monthly payments is worth the extra cost.
7. Are you being charged extra for payment protection insurance which may be overly expensive and wholly unnecessary? Often sold with a personal loan or a credit card, the theory is that they will cover any monthly repayments missed due to accident, sickness or unemployment. However, they’re so bad that the Financial Services Authority must closely monitor the sale of any such policy. Always seek professional advice before cancelling any policies attached with your insurance so you can be sure that it is the best thing for you.
8. Simply another form of insurance that you could well do without, the extended warranty could well end up costing you more than it would to buy a replacement for the item. Bear in mind that products will tend to have a manufacturer’s guarantee and you’re statutory rights exist to ensure products are of satisfactory quality.
9. Be sceptical of investing in affinity accounts. These let you donate some of your interest to a cause but don’t actually work out as a good deal for anyone. Is it worth a far less competitive rate to feel affiliated to your favourite football team? Go for something with a better rate and donate money separately. You’ll all be better off.
10. Buying mobile phone insurance from the supplier is essentially paying twice for the same cover. First, check your home insurance, as it could cover you under accidental damage. Do check the excess though; it could be more than the phone’s worth.
Harrington Brooks aim to solve your debt problems. The easiest way to do that is to simply help you to avoid debt in the first place. So, we’re glad to be able to offer some financial pointers. However, if you’re already in debt, we’re experts in helping you solve the problem of bad debt quickly and easily. We can provide you with a debt solution tailored to suit your specific needs, so visit www.harringtonbrooks.co.uk and take the fast, free debt test to find out the best way to solve your financial problem.