Spending habits have changed radically since the start of the pandemic, with many people now having to get by on a reduced income – not to mention that our usual routines and access to our usual leisure activities have altered significantly.
Many households are being cautious with their finances, but it can still be tempting for people to make some money mistakes, particularly if they’re feeling bored or in need of cheering up, which they may later come to regret.
Here, Anthony Morrow, chief executive of digital finance advice service OpenMoney, highlights five money mistakes to watch out for.
1. Splurging on ‘big ticket’ items
With only a limited array of our usual entertainment outlets available, succumbing to the effects of boredom and splurging on a new home TV system or state-of-the-art speakers, for example, is both tempting and understandable.
Emotionally, it’s easy to fall into using spending as a crutch and distraction, but with some self-monitoring and patience it’s possible to separate out the sensible purchases from the impulse splurges.
Rather than clicking on the checkout button immediately, try to limit impulse buying by sticking to a ‘one week’ rule and waiting at least seven days before you make a big purchase. Be sure to explore alternatives and see if it might be better to hold off and make do with what you have at home.
2. Being attracted by holiday deals without checking the small print
It’s understandable people want something to look forward to and will be dreaming of a time in the future when they may be able to get away. But if you’re considering splashing out on a trip for some time in the future, don’t lose sight of the need to focus on your financial security right now and build up savings.
Trying to predict what may happen in the future is very tricky and could lead to you losing out – so make sure you understand what would happen to any money you’re thinking of putting towards a trip if it did not go ahead and check all the latest travel advice. Check the terms and conditions on refunds and cancellations and make sure to read the fine print.
Up-to-date travel advice can be found here.
3. Gambling away money, which could lead to problem debt or make debts worse
Whether it’s to pass the time, have some sort of distraction, or in the hope for a big win, the temptation to gamble may be particularly strong. But if you are finding it’s becoming a problem, you might want to consider speaking to organisations such as Gambling Help Online.
Many free games are available online, which can provide entertainment without financial burden or risk.
4. Getting caught in a subscription trap
Many people have signed up to subscriptions to treat themselves or loved ones during the pandemic, but be mindful of what happens when a ‘free trial’ period comes to an end. Use calendar notes and reminders on your phone so you remember to cancel before the money starts coming out on a monthly or weekly basis.
5. Being tricked by COVID-19 scams
The Australian Competition and Consumer Commission’s (ACCC) Scamwatch reports that last year Australians lost a reported $176.1 million to scams, up by 23.1 per cent compared to 2019.
Australians were at their most vulnerable during the annual online sales near the Christmas break.
Despite being some months after the worst of the pandemic, more money was lost in December than any other month in 2020 with a combined loss of $22.4 million reported.
Of these scams, the most damaging were those presenting fake investment schemes, followed by dating and romance scams and then false bill scams in third.
Always remember when spending time online, you need to be extra alert to those who may be taking advantage of the current situation to scam people out of their money.
‘Twishing’ and ‘smishing’ are both types of phishing scams – using Twitter or text messages to pose as bank staff or friends and scam unassuming people out of their money. These scams can be convincing and elaborate. Be extra vigilant about sharing any details about yourself online, over the phone or in person.
Have your spending habits changed over the past year? Have you spent more or less?
– With PA
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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.