Halloween is often a thrilling time for you and your family, full of pumpkin carving, eerie movies, and spooky fun.

Yet, amid the ghosts and ghouls of the holiday, some financial mistakes exist that can be equally terrifying. 

If your finances scare you somewhat, then you’re not alone, as a survey from the Office for National Statistics found that 77% of UK adults reported feeling very or somewhat worried about rising living costs.

Thankfully, when you’re aware of these mistakes, it’s easier to take the necessary steps to avoid them – continue reading to discover five of these scary financial errors and how you can unmask them. 

1. Not having an emergency fund

The first scary financial mistake is not having a suitable emergency fund to fall back on. Despite how important it is to have a rainy day fund, This is Money reveals that 1 in 3 Brits don’t have enough cash for emergencies.

Your emergency fund is essentially your safety net, for unexpected expenses such as your car breaking down, or short periods out of work.

It’s prudent to set aside between three and six months’ worth of essential household expenditure in your emergency fund. Though, due to increased financial vulnerability, it may be worth keeping as much as 12 months’ worth of expenses if you:

  • Are close to retirement
  • Have many dependents
  • Are self-employed. 

You may want to keep your emergency fund saved in an easy access savings account, ensuring that you can access the money at a moment’s notice to cover any financial disruption. 

Without this financial cushion, you may need to rely on savings you have earmarked for other purposes in the event of a sudden loss of income or surprise expense. In fact, having an emergency fund can even provide much-needed peace of mind that you’re ready for the worst, giving you a greater sense of financial confidence and stability. 

2. Remaining on your lender’s standard variable rate

Another frightening financial blunder is remaining on your lender’s standard variable rate (SVR) for an extended period, as it’s typically uncompetitive compared to other fixed- and tracker-rate deals available. 

You’re usually placed on your lender’s SVR when your current mortgage deal comes to an end, and you don’t source a new one beforehand.

To show how expensive SVRs tend to be compared to other fixed-rate deals, MoneyWeek states that the average SVR is currently 8.09%while Moneyfacts reveals that the best two-year fixed-rate 75% LTV mortgage is 5.54% (both figures correct at 4 October 2023).

For reference, MoneyHelper’s mortgage calculator shows that a £200,000 capital and interest mortgage over a 25-year term at an interest rate of 5.54% would cost £925 a month. Meanwhile, the same mortgage on the average SVR of 8.09% would cost you £1,167 a month – £242 extra monthly. 

As you can see, it can be considerably more expensive to remain on your lender’s SVR for an extended period, so you should ideally source and secure a new deal around six months before your current one ends. We can help you do this.

3. Not having financial protection in place

Financial protection ensures that you and your loved ones would receive financial support should the worst happen. So, yet another alarming financial mistake is not having this protection in place.

Imagine you could not work due to a severe illness or injury and lost income as a result. You and your loved ones may face financial hardship due to this loss of income.

Income protection and critical illness cover can support you through these challenging times. 

Indeed, income protection provides a tax-free monthly income if you can’t work due to injury or illness. In contrast, critical illness cover pays an invaluable tax-free lump sum if you’re diagnosed with a severe medical condition.

This financial support can give you much-needed peace of mind should the unthinkable happen. 

Moreover, while it’s often scary to consider your own mortality, life cover can provide your loved ones with financial support should you pass away. 

This would likely be a stressful time for your family, so life cover can comfort you knowing that you’ve made financial provision for them, giving your loved ones one less thing to worry about. 

4. Avoiding estate planning until you’re already ill

It can sometimes be emotionally taxing to think about planning your estate but, like any great horror film, it can be cathartic when you come out the other end. Estate planning can include anything from:

  • Writing a will
  • Completing an “expression of wish” form with your pension provider
  • Reducing the value of your estate to mitigate Inheritance Tax (IHT)
  • Registering a Lasting Power of Attorney (LPA) document
  • Discussing your wishes with your beneficiaries.

It’s essential to consider these things early, as if you’re already ill when you start the estate planning process, you could incur further financial and emotional distress. As an example, you typically can’t put an LPA in place if you’re already incapacitated.  

Preparing for the future now and undertaking the necessary steps to ensure your estate is organised could save you and your loved ones some difficulty later down the line. 

For instance, if you write a will and update it regularly, this can ensure that your assets pass to the right people, giving you invaluable peace of mind that your estate will be distributed according to your wishes. 

This can ensure that your family won’t lodge any inheritance disputes, and is especially important when a significant life event occurs, such as a new child, marriage, or divorce. 

Meanwhile, an LPA can give you the peace of mind that someone you trust will oversee your affairs should you become mentally or physically incapacitated due to an illness or injury. 

5. Not seeking financial advice

While it may sometimes seem tempting to take a DIY approach to your financial situation, there’s a chance that this could go wrong, ultimately making things more expensive for you if you make an error. 

Speaking to a financial adviser can help you to avoid any terrifying mistakes. We can provide guidance on your mortgage, protection, and wider financial needs, helping you to save money, protect your family, and find the right mortgage deal. 

If you would like some help managing your finances, please email enquire@london-money.co.uk or call (0207) 808 4120 to find out how we could help.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation. 

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

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