Avoid simple money mistakes

Thursday 7th June 2007

Niki Chesworth shows how to increase your financial savvy and avoid common money errors we all make.

1. Being too loyal
Women are more likely to stay loyal to financial providers, even if they are not getting the best deal.
The solutions?
- Use sites such as moneyextra.co.uk, uswitch.co.uk and simplyswitch.co.uk to search out cheaper deals.
- Your mortgage is your biggest bill, so switch that first. You could switch and save around £1,500 a year on a £100,000 mortgage. Visit charcolonline.co.uk for an online mortgage calculator.

2. Paying too much tax
£7.9 billion is paid each year in unnecessary tax payments. Part of the problem is getting whoever earns most to put assets in the lower earner's name.
The solutions?
- Don't pay tax on your savings, but earn tax-free interest with a cash Individual Savings Account (ISA). For best buys, visit moneyfacts.co.uk.
- Savings and investments should be in joint names or in the name of the lower or non-taxpaying spouse (Millions could be saved in capital gains and income taxes by heeding this tax tip).
- If you're a non-taxpayer, register to receive interest gross (ask your bank or building society for form R85 or download IR111 from hmrc.gov.uk).

3. Not thinking about long-term planning
Women are great at managing day-to-day budgets, but not at looking to the long term.
The solutions?
- Wake up! How would you cope if your husband was incapacitated or passed away? Protect yourself with savings. If you don't raid them, you still have the money. But you need to be disciplined; set aside at least six months' outgoings.
- You need to cover your mortgage and all other expenses should one of you die. Make sure you are both covered. Go to lifesearch.co.uk

4. Undervaluing ourselves
Women earn nearly 30 per cent less than men who do the same job – partly because they don't ask for pay rises.
The solutions?
- Checking if your male colleagues are being paid more is not easy. Most people find out through gossip with colleagues. If you think you are being discriminated against, visit the Equal Opportunities Commission site (eoc.org.uk) for advice.
- Put a case for higher pay to your employer. Visit sites like paywizard.co.uk to check rates. But you need to show that you are doing more than is required in your job description.

5. Being in debt is a feminist issue
The average woman over 35 owes double that of a man.
The solutions?
- Half of women falling into debt blame the unexpected (ill health, divorce, redundancy) for their problems rather than over-spending. That's why savings are vital.
- If you are starting to struggle, set yourself strict spending limits to prevent falling deeper into debt. Visit www.moneysavingexpert.com for tips on how to set up your own financial budget.
- Get rid of the most expensive borrowings first (store cards often have excessive rates). Switch loans and other debts to cheaper rates and make the most of 0 per cent credit card deals.
- Get help. Contact the Consumer Credit Counselling Service (cccs.co.uk) or the National Debtline (nationaldebtline.co.uk).

6. Giving to the kids
Men out-save women by one and a half times. We sometimes earn less and have less to save, but we also put our family's needs first.
The solutions?
- Change your mindset. Sixty four per cent of parents in their fifties are still giving financial help to their grown up kids. Teach them to be financially independent.
- When they have children, half of women stop paying into their pensions. Re-start your contributions asap. Visit legalandgeneral.co.uk and check out the pensions calculator.

7. Failing to write a will
Seven in ten people who die have failed to write a will.
The solutions?
- Write a will at the same time as your spouse for maximum tax savings.
- If you have young children, make sure your will stipulates who will look after them.
- Amend it if you divorce, one of you remarries or you start to co-habit.
- Online will writing services charge less than £100, but you may want to talk to someone face-to-face. To search for a specialist solicitor, visit lawsociety.org.uk.

8. Relying on men when they retire
Many women face the prospect of having to ask their husband's permission to spend money once they retire, as just over half are not contributing to a pension.
The solutions?
- Start thinking about your own future. Even if you are not working, you can pay into a stakeholder pension and receive tax relief.
- The alternative is a tax-free Individual Savings Account (ISA). Visit bestinvest.co.uk for recommendations or unbiased.co.uk to find an independent investment adviser in your area.
- Ensure that you get the full basic state pension (eight in ten women retiring today don't) by calling 0845-3000168 for a pension forecast and downloading form CA93 from hmrc.gov.uk. This may require extra National Insurance contributions.
- If you are offered a company scheme, join it – particularly if the employer pays in. It's free money.

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