What is a “money leak” and how can you prevent them from eroding your wealth?

With autumn now upon us, you might be thinking about retrieving your trusty winter coat from the cupboard very soon. If you’re lucky, you might find a forgotten £10 note in the pocket.

While discovering some spare change in your coat pocket is always a lovely surprise, older notes or coins might be less helpful. Yet the BBC reports that Brits currently have a combined £7.2 billion worth of old UK bank notes and coins that are no longer legal tender.

Forgetting to return your old paper notes to the bank is just one way you might be losing money. Alongside other “money leaks”, you might find that you’re losing a significant amount of money each year through avoidable mistakes.

Read on to learn more about what a “money leak” is and how you can prevent them from eroding your wealth with some simple and practical steps.

A money leak is an expense that you have forgotten about or no longer need

“Money leak” is a term used to describe any unnecessary expenses or purchases you’re making. Usually, each one on its own is innocuous, but they can soon add up and cost a significant amount of your income.

Some of the most common money leaks include:

• Impulse purchases

• Late fees on bills or overdraft fees

• An introductory rate that has elapsed and now costs you more than you realise

• Subscriptions that you no longer use, such as streaming services, magazines, or memberships to organisations.

As you can see, money leaks can crop up unnoticed over time as you stop using subscription services, for example. If it’s only costing a few pounds a month, you might not even notice it at first. But if you can set some time aside to address each one, you might find yourself with a handy bit of extra cash each month that you can put towards achieving your goals.

3 practical ways to plug money leaks and protect your wealth

Fortunately, there are some simple steps you can take to make sure you can spot money leaks more easily and take swift action.

1. Review your expenses regularly to identify your money leaks

This one seems obvious, but it’s worth including as it’s easy for this to slip to the bottom of your to-do list when life becomes busy. Once a quarter, sit down and review your credit card and other statements to see exactly where your money is going. If you identify a subscription you don’t need any more or another expense that seems unnecessary, you can quickly take action.

2. Make a note of the expiry date on introductory rates or discounts

It’s a good idea to take advantage of introductory offers on services you need, but after they expire you could find yourself losing more money than you realise. When you sign up for a new service, make a note of the expiry date of any introductory rates on your calendar to remind yourself to shop around again. This might include bank accounts that have a maintenance fee, the introductory savings rate on a new account, or the interest rate on your credit card.

3. Set up direct debits to avoid late fees on payments

Missing bill deadlines or accidentally falling into your overdraft can incur fees that add up over time. Fortunately, there is a simple solution that might help. Setting up a direct debit can ensure that your bills are always paid on time, helping you to avoid costly late fees.

Get in touch

Our friendly team of financial planners in Towcester are here to help you make the most of your income and avoid money leaks. When you work with us to achieve your long-term goals, one of the things we’ll do is help you to identify how you could use your income and savings more efficiently.

At your regular reviews, we can look over your finances to see the progress you’ve made. We can also help you make sure your savings accounts offer the most competitive rates.

To learn more about how we can help you, please get in touch today. Email theteam@fortitudefp.co.uk or call us on 01327 354321.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.