IF you’re wondering where your money’s going each month, it might not be big bills or bad luck to blame but small, repeated mistakes that add up fast.
From letting your savings sit in low-interest accounts, to underestimating the real cost of long mortgage terms, financial experts warn that common habits could be quietly emptying your bank accounts.
2
Small, repeated mistakes could be the reason your bank balance is dwindlingCredit: getty
2
Money experts revealed the biggest habits that are keeping people poorCredit: Getty
We asked money experts and behavioural scientists to reveal the biggest habits that are holding people back.
1. Not knowing what’s coming in and going out
It’s hard to feel in control of your money when you don’t know where it’s actually going.
Many people assume they have a rough idea, but the reality is that forgotten subscriptions, auto-renewing services and small daily purchases quickly add up.
Without visibility, your budget can slowly unravel, and by the time you realise, you’ve slipped into the red.
Vix Leyton, consumer expert at Thinkmoney, says the fix starts with routine: “Take time to know what your outgoings are and what is coming in.
“Some apps, like Thinkmoney, offer a snapshot of what you’re spending, and can even ringfence bill money for you so you don’t accidentally end up facing penalties and late fees.”
Even a five-minute weekly check-in can help avoid nasty surprises and highlight where cutbacks are needed.
2. Living without a savings buffer
It’s hard to save money – but not having a buffer can leave you exposed to high credit when you need cash quickly.
Whether it’s a broken boiler, a car that won’t start or a sudden cut in hours at work, not having a cushion means falling back on credit cards or payday loans just to stay afloat.
The result is a constant feeling of stress, and a budget that can be thrown off by the smallest shock.
Thomas Mathar, behavioural researcher and host of The Money:Mindshift Podcast, says a little slack goes a long way.
He said: “Even a modest buffer, like one month’s rent, can give you the breathing space to make better decisions and avoid high-cost debt.
“It’s not just about the numbers, it’s about having mental and financial slack when life throws you a curveball.”
3. Letting debt pile up month after month
More and more people have credit card debt, which means it can be easy to think it’s business as usual, especially when the minimum payments are low.
But ultimately, you’re paying interest to the bank instead of putting that money toward your own goals. Over time, that can add up to hundreds or even thousands of pounds in lost savings.
“Too many people accept credit card debt as a normal state of affairs. It’s not,” says Mathar.
I’ve made over £56k with a side hustle anyone can do – skint people must stop being scared and should try something new
“Paying down high-interest debt quickly is one of the most powerful things you can do for your long-term well being. It’s buying yourself back freedom, and peace of mind.”
If you’re juggling multiple debts, focus on the most expensive ones first and look into 0% balance transfer options if your credit score allows.
4. Having psychological armour to support you
In the age of side hustles and flashy online success stories, it’s tempting to ditch steady work for riskier pursuits.
But without a reliable income it’s hard to build long-term security.
Inconsistent earnings often mean falling behind on bills, using credit to bridge the gap, and struggling to plan ahead.
Mathar warns that it’s important to have some sort of regular income, even if you’re pursuing other hustles on the side.
He says: “A steady income isn’t just about covering bills, it’s psychological armour.
“When you’re living month-to-month or under-earning compared to your potential, the stress compounds.
“You don’t need to chase big money, but you do need income that’s ‘good enough’ to support a resilient, happy life.”
5. Leaving savings in a dead-end account
You might feel good about putting money aside, but if it’s sitting in an easy-access account earning barely any interest, your savings are losing value in real terms.
With inflation still high, the cost of leaving cash in low-yield accounts is higher than many realise.
Adam said: “The likes of HSBC, Lloyds Bank, Santander, NatWest and Barclays all have easy access accounts paying around 1.1 to 1.2 per cent interest, far below the typical returns savers could expect, which is currently 3.51 per cent.”
The top performing options can pay even more, and shopping around and switching accounts only takes a few minutes online.
How to effectively manage your money
Kara Gammell, finance expert at MoneySuperMarket, gives tips on how to get a handle on your finances so you have more left for saving,
If you’re struggling to get a grip on your finances, the way to start is to do a proper inventory.
Try Emma, the money management app, which uses open banking to combine information from all your bank accounts, savings accounts and credit cards, plus investments. The app then highlights any wasteful subscriptions and costly debt and helps streamline your savings.
What’s more, it analyses your personal finances and recommends ways to conserve money so that you can get on track financially more easily than ever.
If you want to have a deep dive into your spending habits, go through your bank statement at the end of each month and give every purchase a rating of one, two or three.
Mark with a ‘one’ any purchases that didn’t make you feel good; give a ‘two’ rating to things that felt ‘sort of good but indifferent’; and mark with ‘three’ any purchases that you would make all over again in a heartbeat.
You’ll be surprised by what you learn.
Monitor your credit report
From overdrafts to loans, credit cards, mobile phones and mortgages, it can be hard to keep track of your finances, and it can be all too simple to find yourself in the dark about how much debt you have in total.
But this information forms your credit score, which is used by lenders to determine whether you’ll be offered competitive rates and offers for financial products, or even whether you will even be accepted when you make an application.
I’m automatically notified when my credit report is updated monthly, which can be a huge help in avoiding any financial problems from spiralling and means I always know what my overall financial situation is.
The tool also suggests ways to improve your credit score, so you’re more likely to be offered competitive interest rates, which helps you save money in the long run.
6. Not making the most of your ISA allowance
More savers than ever are being hit with tax bills they could have avoided.
Frozen tax thresholds mean that even modest savers can end up over the personal savings allowance, paying tax on any interest they earn.
That means, if you’re not using your ISA allowance, you’re potentially giving money away for free.
French explains: “Saving and investing are some of the best ways to build wealth over time.
“But it’s important that savers are aware of their tax liability on any profits they make – which can add up over the course of a few years.
Plenty of savers can avoid this tax bill by making use their yearly ISA allowances.
You can save or invest up to £20,000 a year tax-free, and every pound sheltered from tax is a pound that keeps working for you.
7. Only saving for retirement, and nothing else
Putting money into a pension is smart, but it shouldn’t be your only savings plan.
Many people now take career breaks, retrain, care for relatives or start businesses, and those transitions need funding too.
Mathar says ignoring this reality can leave people exposed.
“We don’t live three-stage lives anymore – education, work, retirement… A ‘transition fund’ – even just a few months’ salary – makes those big life pivots possible without financial panic.”
8. Being too harsh on yourself when things go wrong
Money mistakes happen. But too often, people fall into a cycle of guilt and avoidance, especially if they’re already struggling.
That mindset can stop you from facing your finances or reaching out for help, which only makes things worse in the long run.
Mathar believes the solution starts with self-empathy. “Here’s the truth: we’re all a bit messed up when it comes to money.
Our brains are wired for short-term wins, not long-term planning.
The goal isn’t to be perfect with money; it’s to build enough slack, mental and financial, so that one mistake or setback doesn’t knock you flat.”
9. Not overpaying your mortgage when you could
With mortgage rates still high and household budgets under pressure, many borrowers are choosing longer terms to keep monthly payments manageable.
But unless you’re also making overpayments, that strategy can come at a serious long-term cost.
French says small changes now can lead to huge savings later: “Overpaying by £200 per month on that same £250,000 40-year mortgage could shave almost 13 years off the mortgage term, saving them around £123,000 in interest payments.
“This is all without being tied to having to consistently make higher payments every single month – boosting the flexibility of their budget and their financial resilience.”
Most lenders allow up to 10 per cent overpayment each year.
Even £50 a month can help you become mortgage-free sooner and pay far less in interest overall.
Top tips for becoming an ISA millionaire
SAVING into a stocks and shares ISA can help you build wealth faster over the long term than cash savings. Dan Coatsworth, investment analyst at savings platform AJ Bell, gives his advice…
Start as early as you can
Time in the market is important, not just so you can ride the market ups and downs but also to let your wealth build up.
Not everyone can afford to invest the full £20,000 ISA allowance each year, particularly younger people who might be on a lower salary.
The trick is to start as early as possible with what you can afford to invest. Increase your contributions as you get older, such as when you get a pay rise.
Maximise your contributions
Try to invest as much as you can each month once you’re sure all the essentials are covered.
Create a budget so you can pay bills in full and clear any expensive debt, such as personal loans or credit cards.
The remaining money can be used to fund your lifestyle and to top up your ISA.
Be consistent with contributions
Feeding your account on a regular basis means you get into the habit of squirrelling money away for your future.
After a while you get accustomed to that money going into your ISA that you may not even think about alternative uses for it, such as going shopping or down the pub with your friends.
Keep an eye on costs and charges
Costs can add up over time and eat into your returns. Try not to fiddle too much with your portfolio as trading in and out of investments incurs transaction charges.
It is important to be patient with investing, especially for someone hoping to be an ISA millionaire as the journey to build up this wealth could last for decades.
Having a diversified portfolio is good practice for any investor and essentially means keeping different types of investments to help balance out the risk.
Then if something goes wrong with one of your investments, you’ve got the rest to hopefully act as a cushion to minimise the pain.
Diversification can involve investing in different industry sectors, geographies and asset types. For example, a diversified portfolio might have exposure to shares, funds and bonds from around the world.
Companies and funds often pay dividends every three to six months.
Think of these as rewards for taking the risk of owning their shares or fund units. While it can be tempting to pocket that income stream to spend on yourself, history suggests one of the biggest contributors to investment returns is reinvesting dividends back into your account to grow wealth faster.
LYING in bed at night 68-year-old Melanie O’Reilly lay awake worrying about how she couldn’t afford to quit her £23,500 a year, 37.5-hour a week job working in a call centre.
She was £13,000 in debt and knew she couldn’t afford to pay the £500 a month repayments to the bank – but she was desperately unhappy in her job.
1
Melanie O’Reilly, 68, thought she’d never retire due to debt
Her days were spent fielding angry calls from Hounslow residents complaining about council tax and housing benefit.
She had moved from South Africa to England in September 2019 with no savings but found a job quickly due to her past career in office furniture sales.
However, the pandemic hit and in October 2020 she was made redundant before struggling to find a job at a call centre in the local council in Hounslow, West London in February 2022.
“I couldn’t stand it anymore. I was sitting there most days in full-blown migraine feeling like I had sandpaper in my eyes, until I couldn’t see the screen anymore,” Melanie, now 69, said.
“I had been very good at my job in South Africa, and I was excellent at sales.”
“Suddenly I was being micromanaged by a 26-year-old, who would count how many times I went to the toilet in a day, and tell me off if I took 31 seconds on a call instead of 30 seconds.
“The staff turnover was ridiculously high and it started to affect my physical and mental health.”
Melanie, who had previously worked as an insurance PA in London before the move to South Africa, was utterly fed up, and knew she had to retire – but had no idea how she could do so with her mounting debt.
She had lent her son and daughter-in-law, who had also moved to the UK, money for a deposit on a home in Colne, Lancashire – but then disaster struck.
Suddenly her daughter-in-law was made redundant shortly after they had their first child, meaning they couldn’t pay Melanie back as quickly as they’d planned.
Melanie was also dealing with the financial fall out of splitting from her partner and she took out a £15,000 personal loan and she had mounting credit card debt of £3,000.
Worryingly one in three people approaching retirement now have debt, with the average over-65 borrower owing £17,000, according to Money Wellness.
Financial anxiety among the 65 to 74 age group has more than doubled since 2021.
“I had the personal loan, but I was not behind in my payments and I just knew, ‘I’ve got to leave. I have to retire.
“If I don’t, I am going to have a breakdown’,” Melanie said.
“I decided to retire and I did, in April 2024. I called up Lloyds Bank and I said, ‘I’ve got this personal loan with you and I know that a few months from now I’m going to end up not being able to pay you.’
“I knew I had to take preventative measures before I got behind in any of my payments.
“I was hugely concerned about how to get Lloyds Bank to agree to a reduced monthly payment.
“I knew I couldn’t pay them back £500 a month, and I knew they wouldn’t negotiate a new loan with me because I was unemployed, as I was now retired with no real income.”
Lloyds put Melanie in touch with Money Wellness, one of the largest providers of debt advice and debt solutions in the UK.
Money Wellness provides free, confidential support to anyone struggling with money or debt, with support available online 24/7 or over the phone, so people can get help in the way that suits them best.
Melanie still owed £13,000 of the £15,000 personal loan. She called Money Wellness, and they asked her to draw up an income and expense statement.
Advisors went through her statement in detail, making allowances for everything from clothing to haircuts, and calculating how much she could afford to pay back each month to help Melanie put a debt management plan in place.
“They were so empathetic and professional,” Melanie explains.
“We revised the budget down to a manageable figure that I could pay Lloyds Bank back and by the end of it, it felt like this was too good to be true.
“They took the burden of negotiations off my shoulders and it was all done seamlessly for me without me having to worry about anything.”
The adviser told Melanie that they would negotiate the figure she had to pay back directly with Lloyds Bank, to the extent of setting up a debit order.
“After the call, I sat back and wept,” Melanie remembers.
“I was hugely concerned because when I was working at the council, I had people calling me up saying, ‘I’ve got the bailiffs at my door. They’re bashing my door down. What do I do?’
“I did not want to be in that position, and I knew that that is a reality that can and does happen.
“I did not want to go anywhere near being that person who’s got the bailiff bashing at your door. That is why I nipped it in the bud before it became a problem.”
From paying £500 a month back, Melanie now pays back £134 a month, with no added interest.
She lives in a HMO in Burnley so she doesn’t pay utility bills or council tax and receives housing benefits and pension credit.
Her repayments come from a small state pension, pension credit and housing benefits.
She receives £456.64 state pension, £451.56 pension credit and £368.20 housing benefit every four weeks.
She’d had to spend her small private pension on replacing her car after a car accident, and buying essentials like furniture.
Money Wellness reviews her plan annually, adjusting the amount if her income changes.
Melanie feels positive about the future and says the debt advice she received from Money Wellness is “the best decision I ever took”.
“For so long, I’d sat with this worrisome burden, thinking ‘I need to retire but I’ve got this debt. What do I do?’ Then these angels from heaven stepped up and helped me,” she adds.
“I feel as though a mountain had been lifted off my shoulders.”
How to cut the cost of your debt
IF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money
Work out your budget – by writing down your income and taking away your essential bills such as food and transport If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
HUGE changes to Buy Now Pay Later rules that will help protect customers have been confirmed by the government.
The new Labour government has published its response to a consultation on proposals to tighten up rules in the Buy Now, Pay Later (BNPL) sector.
1
The government has confirmed huge changes to the Buy Now Pay Later rules,Credit: Getty
BNPL is a type of credit scheme that allows shoppers to purchase items and spread the payments over a set period and is used by 10million Brits.
While the schemes are popular, they have remained largely unregulated, which has raised concerns about people falling into debt.
The government has now said that from next year BNPL firms will need to follow “consistent standards,” so shoppers know exactly what they’re signing up for.
This means firms will have to be clear and transparent about any late fees or if they could affect customers’ credit ratings and how.
They should also signpost customers towards debt help in any correspondence.
For consumers, that could look like upfront credit checks to make sure people can repay what they borrow.
Also, customers will have quicker access to refunds and the right to complain to the Financial Ombudsman.
The plans will bring the products under FCA regulation while ensuring they also adhere to a large proportion of the Consumer Credit Act and Section 75, which give shoppers various rights.
Lisa Webb, Which? Consumer Law Expert, said that research shows that many users “do not realise they are taking on debt or consider the prospect of missing payments.”
She added: “It’s good to see the government taking action to regulate BNPL firms and introducing affordability checks.
Five key changes to PIP & Universal Credit as Labour’s benefits crackdown unveiled
“The government also needs to ensure this includes greater marketing transparency and information about the risks of missed payments and credit checks.”
Proposals to regulate BNPL products were first touted in 2021 but faced repeated delays.
Last year, The Sun revealedthe previous Conservative government had paused the plans over fears that it would drive BNPL firms out of the market during atough cost of livingcrisis.
Then in October, the Treasury Tulip Siddiqexclusively told The Sun that the government had finalised its “bespoke” plans and intended to pass the legislation “as soon as possible” in early 2025.
The legislation bringing BNPL into regulation is set to be laid in Parliament today, May 19.
A consultation on the findings is set to take place with the rules expected to come into force next year.
How can I use BNPL without losing out?
The hope is that this new regulation will prevent people from being able to take on more than they can realistically afford to pay back.
But when used correctly, BNPL plans can be a useful way of managing your finances.
The products work in a similar way to other types of credit. The main difference is that they don’t charge interest.
You usually have to make payments by set deadlines over a period of time.
If you meet these repayment deadlines, you shouldn’t be charged any extra fees.
How to cut the cost of your debt
IF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money
Work out your budget – by writing down your income and taking away your essential bills such as food and transport If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
