Back to Money Management

Five examples of bad money management

man with head in hands looking at phone
man with head in hands looking at phone

You hear a lot about poor spending habits, but what do they actually look like in real life? We give you some examples of common problems and what you can do about them!

Not taking control of your finances could mean you’ll have difficulty paying and saving for things. Trial and error can help you stay in the black eventually after you’ve got it right, but it’s also pretty risky. Learn from these examples instead to keep more in your bank account and your wallet.

Spending more than you earn

Problem: Your bank balance always seems to be going down. Even when you’ve been paid, the total seems to be less than the last time it was put in. You’re not completely sure how much you make every week or month and you just buy things without thinking about it, or your tastes are simply above your current pay level. The result is less money in your pocket and possibly even dwindling savings.

Fix: Get a proper picture of what you have coming in and going out. Use our guide on how to set up a budget and get a handle on your money. We also have tips on how to save on utility bills and food bills.

Going into your overdraft

Problem: Maybe you’ve had several big and unexpected costs, such as a car repair and you’ve had no choice but to fork out over more than you can really afford. It’s meant that you’ve gone into your overdraft and now the bank is charging you because of it, which is just making it even harder to get out of your current situation. Maybe payday has solved a similar situation before but this time, it’s weeks away and in the meantime you’re just going more and more overdrawn.

Fix: In the long-term, it could help to set money aside every month or week for big expenses so you don’t get caught out. For now, you may need to generate extra income. Outside of the usual things like selling items on sites like eBay, we have a few less common methods to making more money.

Impulse buying

Problem: You might be quite careful with your cash most of the time but can’t resist certain items. You might even reason that there’s no point in saving up when you could buy it now and pay it off later – the costs to you are the same. However, it means you don’t always have money when you need it, making you sacrifice being able to save for the things you truly want for less important things.

Fix: Ask yourself whether you actually need what you’re about to buy and if you can make do without it. There’s a difference between what you need and what you want. Usually, things you want aren’t essential. Being more accountable for what you buy can help with that. Try keeping track of what you buy with your smartphone, perhaps using one of the apps we’ve picked out. Most apps can show what you spend in simple charts, so you can easily see how much of your money is going on things you don’t need and compare that with how much things like electricity and water bills cost you in the same period. Putting it all into perspective might stop you being so quick with your cash next time.

Not setting money aside

Problem: You’re not one to plan your money and because of that, you’re often caught out by costs you didn’t see coming. Plus, you find it hard to gather the money to pay for things because you don’t have any extra cash, only what you need for that month.

Fix: If you split your money up rather than having it in one pile it makes it harder to overspend as you already have cash earmarked for other things. You can do something called the ‘envelope system’. When you get paid, you share the money out to different envelopes you’ll use to pay for things like rent, bills and emergencies, only using this money for its designated use. When that cost comes up, you use the money in the envelope that’s been kept out of sight and away from temptation.

Similarly, you could always set up a savings account and then a monthly standing order of, say, £20 from your old account to your new one. That way, you’re always building a little pot of savings without even realising it and because it’s out of the way, it’s not easy to spend on a whim.

Our guides on how to set up a budget and the best smartphone money apps should be able to help.

Not shopping around

Problem: When you see something you want, you buy it. Or, simply because one supermarket or shop is more convenient, you overlook the savings you could be making elsewhere. You’re not interested in hunting around for different insurance or energy bill quotes; you just want your renewal out of the way and your bills out of mind. The result is that you constantly spot things cheaper than when you bought them and, in the end, have less in your account than you could if you’d shopped around.

Fix: Understanding where you can find things cheaply and going there first will mean you’ll save money without even having to shop around. Try our choices for the best places to find good prices. Knowing which supermarkets are cheapest could mean you keep a little extra in your wallet. While £5 on your weekly shop might not seem like much by itself, over a year, that’s £260. It could be enough for a good amount of your Christmas spending or potentially even a short, low-cost holiday.

Also, don’t forget about comparison sites that’ll show you the lowest possible price for things like utilities and broadband. Should you find a cheaper deal, it doesn’t mean you have to switch. There’s nothing to stop you going back to your supplier to see if they’ll match it. If they can, you get the price and the convenience of not switching.

/ 5 reviews

Please rate this article

Representative 535.3% APR