COMMENT
Five Massive Money Mistakes

We all make mistakes, and many of them are often related to our finances.

But, with the advent of the New Year, why not resolve to turn your 2004 sour lemons into delicious cherries in 2005? Don't make the following mistakes or - if you already have - then resolve not to make the same mistakes again!

1. Failing to Budget

If you find that you regularly go into the red each month, then you must be living beyond your means, which means spending more than you earn. It also means that you're not really keeping an eye on where all your money is going - and yet that is the first step to learning how to budget properly.

So, create a list of your earnings, outgoings and debts, using our Statement of Affairs calculator to establish how much you earn, spend and owe. Then make a list of the bare essentials you need to get by, including mortgage or rent, council tax, fuel and water bills, groceries, travel expenses, TV licence, telephone, and home and car insurance. These are your priority payments, which you should meet before paying for anything else. Once you've established how much is coming in and how much you need to survive, you'll know exactly where you stand financially and will be able to identify any problems that you need to fix.

2. Borrowing Too Much

Last year, the Citizens' Advice Bureau (CAB) dealt with nearly 1.1 million debt-related issues - an increase of 74% over the last seven years. According to the CAB, consumer debt is the fastest growing area for which people seek help. Worryingly, more than half of their clients were trying to cope with their debt problems by borrowing more.

If you must borrow money, then learn how to do it sensibly and, if you're worrying about debts, then seek help from your local CAB, the Consumer Credit Counselling Service or Payplan. All of these organisations provide help and advice for free - and they will help you to negotiate with the creditors who are pestering you.

3. Failing to Shop Around

If you're looking for a mortgage, loan or credit card, you may think that the easiest way to go about this is simply to approach your bank. After all, you know them and they know you, so it's comfortable to believe that you'll get what you want, right? Wrong! Lenders are always keen to add to their customer base, so newcomers are often welcomed with open arms - and given better deals than existing customers. Take advantage of this fact - it'll save you money in the long run.

4. Being Too Loyal

Anyone who doesn't bother to check regularly whether they're getting value for money for their current financial products is probably losing money hand over fist. For example, there are numerous 0% credit cards that offer interest-free introductory rates on balance transfers. Some do the same for new purchases. If you don't usually pay off your credit card bill each month, then you're paying interest when you don't have to. The best strategy is to become a 'rate tart', switching your personal or home loan to a different deal or lender whenever you can do so without penalty, not to mention looking for better deals on your utility bills, credit cards and savings account.

5. Not Saving and Investing

As we all know, the sooner you start saving and investing, the sooner the miraculous effects of compound interest will kick in. Unfortunately, a rather large number of people are not bothering to save at all, or are saving far too little for their old age. At current rates, only one in four people can expect to be comparatively comfortable in retirement.

It would be a shame if you had to struggle for twenty or thirty years on the meagre State Pension after you've stopped working. That's if the State Pension still exists by the time you retire, of course! So, don't make the mistake of putting off a savings habit. Start today!

Look for better Credit Cards, Mortgages and Personal Loans, and learn How To Borrow Sensibly and Why Rate Tarting Pays Off.