MOST households are looking for ways to hold on to extra cash, but there are some things you should never do when it comes to saving.
Cancelling monthly pension payments, or sacrificing your home insurance may seem like an easy way to keep more money in your pocket – but they could come at a cost.
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We spoke to Sarah Coles of Hargreaves Lansdown to find out the five things you should never cancel if you’re short of cash.
But don’t worry, there are still plenty of ways to save a bit of cash whatever your circumstances.
Some of the tips might be thriftier than others, but all are useful ideas that you can slot into your routine without much effort.
It’s always a good idea to have some extra money in the bank for an emergency and here are the best ways to help you do just that.
Pension
You might be enrolled in a workplace pension scheme, which helps employees save for their retirement outside of the state pension.
Since October 2012, employers have had to automatically enrol workers into one of the schemes.
There are minimum contributions that you and your employer must pay.
Workers have the option to opt out and while that can be appealing when you’re cash strapped, it’s not always a good idea.
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In fact, doing so could lead to less cash later on.
Sarah said: “It may feel like you can put your pension on hold without paying the price, but it’ll make a dent in your retirement savings, and the longer you halt contributions for, the more damage you’ll do.
“When you pay into a pension at work, you also get a contribution from your employer and a top-up from the government, so pausing payments will mean missing out on this free cash too.”
Home insurance
It can be tempting to cancel home insurance policies to save money, but it means taking a huge risk.
Home insurance isn’t a legal requirement but being without it could leave you homeless and penniless if the worst happens.
Sarah said: “In an ideal world, none of us would need to claim on our home insurance, but if the worst comes to the worst, and you don’t have cover, it can be horrendous.
“This is particularly the case with buildings insurance, because if you’re hit by fire or other damage, you could end up homeless without it.
“However, going without contents insurance is also a horrible mistake, as a flood or burglary could leave you without real essentials.”
You shouldn’t cancel insurance that you need unless you’re sure that you will be protected in another way.
It’s also important to read your policies thoroughly before you make any changes to your insurance.
If you think you’re getting a bad deal, you can use comparison websites such as Compare the Market, Confused.com, Go Compare or Moneysupermarket to find the best deal for you.
Car insurance
Depending on your age, motor insurance can take a big chunk of your cash.
But if you ever contemplate stopping paying your policy to help save money, think again.
Sarah said: “Driving without car insurance is against the law, so you could face a fine or six points on your licence.
“The car could also be seized and destroyed. If it goes to court, you could get an unlimited fine or be disqualified from driving.”
If you’re caught driving without insurance you face a fixed penalty of £300 and six penalty points.
Your vehicle can be seized and destroyed and, if the case goes to court, you could be disqualified from driving as well as being hit with a much bigger fine.
Mortgages and loans
When you’re tightening your belt, it can be very tempting to consider a mortgage or credit payment holiday in an effort to save money.
But missing any loan repayment will damage your credit record and make it harder to borrow in the future, according to Sarah.
She said: “Missing mortgage payments could ultimately end with your home being repossessed.
“It’s why it’s top of the list of vital loan repayments. If you’re struggling to pay, it’s vital to contact your mortgage company as soon as possible to try to work something out.
“It’s far better to let them know and make a plan rather than miss payments altogether.”
Mobile phone
Cutting back on your mobile contract can be a false economy unless you consider carefully how much you actually use your phone.
Sarah said: “Unless you also scale back calls, texts and data usage, you could end up spending a small fortune on usage outside your allowance.
“Be realistic with any cuts or this could end up being a false economy.”
It means you’d need to be very disciplined about using your mobile at all to avoid being hit with huge charges.
Things to ditch instead
Cancel unnecessary subscriptions
Services such as Netflix boomed during lockdown when millions of people were stuck at home with nothing to do – but now people are starting to question if their subscriptions are worth the money.
But if you don’t want to quit your binge-watching marathons, there are ways to cut back on spending without having to forgo your daily dose of entertainment.
Sharing streaming subscriptions between a household is one of the easiest ways to save money.
Spotify is one platform that has this option.
While the music streaming service costs £10.99 for a single membership, you can get its Premium Duo plan for £14.99 a month or a family plan for £17.99.
Gym memberships
There are ways to shape up without splashing serious cash that mean you could ditch your gym membership.
But it’s important to check to see if you are still in a contracted period and if so whether you cancel the agreement early
You could try working out at home instead. Turn on your smart TV to find thousands of YouTube fitness videos.
The NHS’s Couch To 5k plan is designed to get beginners off the sofa and running 5km within nine weeks.
Podcasts offering guidance and reminders can be downloaded to your smartphone or you can install an app on your phone.
All you need is a pair of headphones and your running gear. Then you are ready to go.
Meanwhile, we reveal nine big changes to benefits and Universal Credit coming in 2023 – and what they mean for YOU.
Plus, there’s a little-known way parents can get up to £580 free cash for kids’ clothes – and it’s NOT the school uniform grant.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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This post first appeared on thesun.co.uk
