When finances are stretched, it's tempting to cut back on expenses. But there are certain things that you should never cancel, as doing so could end up costing you thousands of pounds in the long run. We spoke to financial expert Sarah Coles of Hargreaves Lansdown to find out what these essential expenses are.
Pension: Don't Miss Out on Free Money
Pausing your pension contributions may seem like a quick way to save cash, but it can have a detrimental impact on your retirement savings. When you contribute to a workplace pension, you also receive contributions from your employer and government top-ups. So by stopping payments, you're not only missing out on potential investment growth, but also free money. It's best to keep contributing, even if times are tough.
Home Insurance: Protect Your Home and Possessions
While home insurance isn't a legal requirement, going without it can be a huge risk. If your home is damaged or destroyed, you could be left homeless and penniless. Buildings insurance is especially important, as it covers the cost of rebuilding your property. Additionally, contents insurance protects your possessions from burglary or damage. To find a better deal, use comparison websites like Compare the Market or Go Compare.
Car Insurance: Stay Legal and Avoid Severe Penalties
Driving without car insurance is illegal and can lead to fines, points on your license, seizure and destruction of your car, and even disqualification from driving. It's crucial to keep your insurance policy active to comply with the law and avoid hefty penalties. If you're struggling financially, consider switching to a more affordable policy instead of canceling it altogether.
Mortgages and Loans: Protect Your Home and Credit Record
If you're considering skipping mortgage or loan payments to save money, think again. Missing payments can damage your credit record and make it harder to secure future borrowing. Worst-case scenario, missing mortgage payments could result in your home being repossessed. Instead, contact your mortgage provider to discuss alternative payment arrangements if you're facing financial hardship.
Mobile Phone: Be Cautious with Cost-Cutting Measures
While cutting back on your mobile phone contract may seem like a good idea, be cautious about how it could affect your usage and costs. If you use your phone regularly for calls, texts, and data, reducing your contract may result in additional charges for exceeding your allowance. Consider alternative cost-saving measures, such as switching to a more suitable plan or using Wi-Fi whenever possible.
Things to Ditch Instead
Cancel Unnecessary Subscriptions
If you're looking to save on entertainment expenses, canceling unnecessary subscriptions is a good place to start. Consider sharing streaming subscriptions with others in your household to save money. Platforms like Spotify offer family plans that allow multiple users for a discounted price.
Say Goodbye to the Gym Membership
You can stay active without splurging on a gym membership. Try working out at home using YouTube fitness videos or following a structured program like the NHS's Couch to 5k plan. There are plenty of free resources available to help you get fit without breaking the bank.
Remember, even when money is tight, it's important to prioritize certain expenses to protect your financial well-being in the long term. Cutting back on the wrong things could end up costing you more in the future.
Please note that the content of this article is for informational purposes only and should not be considered financial advice. Consult with a professional advisor before making any financial decisions.