How To Give Your Finances A Spring Clean
Check All Your Accounts
If you’re not sure where to start, it’s a good idea to take stock of what you already have, beginning with the most basic of financial set-ups – your bank accounts. Whether it’s your daily current account or a longer-term savings or joint account, take a close look to see that everything is still working for you in the best way possible. “With the Open Banking reforms now in place, the easiest way to do this is with a money app,” says Gareth Thomas from MoneySupermarket. “You can connect your current accounts, savings accounts and credit cards to budgeting apps such as Yolt and Money Dashboard to see all your accounts, and your total balance minus your upcoming credit bills and direct debits in one place.” That said, if you’re not inclined to download more money apps, you could check your accounts online or physically print out your recent statements.
Find A Better Deal
While this could apply to your current or savings account (for example, are they offering you the best interest rate available?) it also applies to a number of other bills: think home insurance, utility tariffs, car insurance and more. Use this extra time to do a sweep of what’s out there, and make sure none of your accounts are automatically set to auto-renew. “If you’ve had the same current account for a while, there are plenty of different options out there – and many banks offer cash incentives to new customers who switch,” says Gareth.
Do A Direct Debit De-Clutter
While you’re busy finding the best deals you can, now is also the time to go through all your direct debits and decide which ones could be cut for the year ahead – be it gym memberships you no longer need, magazine subscriptions which are proving costly or that weekly (okay, twice weekly) takeaway habit you’ve formed over lockdown. “With [some] lockdown restrictions still in place, make sure you’re not paying for subscriptions you’re not able to use or need,” says Gareth. “Check through your statements for any recurring payments. If there’s any you don’t want or need, cancel them directly with the provider as soon as possible. Alternatively, if you want to keep your subscription long-term but don’t need it in the short-term, check with the company if you can pause your subscription.”
Adjust Your Budget
Once you’ve purged your recurring payments and checked your bank accounts and bills are working for you in the best way possible, it might be time to adjust your monthly budget. “Whatever your situation, you should take another look at your household expenses and budget,” agrees Gareth. “Under normal circumstances, a good rule of thumb would be to use the 50/30/20 method – where you split your monthly earnings so that 50% goes on your needs, 30% on your wants and 20% on savings and paying off debts.” But Gareth admits, many of us have seen our financial situation altered by recent events, so you might have more (or less) to play with. “If you’re confident your needs are covered, and you’re able to do so – start putting a little extra into an easily accessible savings account to cover any unexpected costs. The current situation is changing daily – so it makes sense to have some emergency funds just in case. One option is to flip the 50/30/20 rule so that you’re putting more into your savings (30%) than you’re spending on wants (20%).”
Consider Re-Mortgaging
If it’s long-term debt you’re keen to get a grip on, and you find yourself able to save more at the moment, then re-mortgaging might be worth thinking about. “If your current mortgage deal is ending, it could be worth thinking about re-mortgaging to a deal with a better rate,” says Gareth. “If you’re on a variable rate, now’s the time to switch to a fixed tariff if you can. Following the base rate cut, deals can be far cheaper, and you could save hundreds of pounds every month, freeing up some much-needed cash.”
Get A Handle On Short-Term Debts
If a mortgage deadline doesn’t apply to you, then paying off short-term debts offers an alternative way for you to clear some of the financial debris at the beginning of a new tax year. “Many of us may have an outstanding balance on a credit card,” Gareth points out. “Unfortunately, paying it off in stages means part of your money goes towards the interest, rather than the debt itself. A 0% balance transfer credit card could help – you’ll have a set period where no interest is charged on your balance. This means every penny you pay lowers the amount you owe. Just ensure you make at least the minimum repayment each month – and pay off the balance before the 0% interest free period ends – to avoid any charges.”
Up Your Savings
While it’s a good idea to pay off any short-term debts first, if you haven’t got one already, think about building a cash buffer so you can easily withdraw money if you need it. “As a starting point, our financial planners typically suggest that we need three to six months’ worth of expenses in cash to cover emergencies,” explains Isabel McDougall from Hargreaves Lansdown. “Once you have a rainy-day stash in place, you should then think about whether your goals are short or long term. Both saving and investing lets you put money aside now, for the potential to have more in the future. But if you're trying to grow your money over the long term (say five years or more), you might find your cash savings aren’t growing as fast as prices are rising and inflation is eroding the value of your savings. This means cash saving tends to be for short term goals, whereas investing should be for the longer term.”
Evaluate Your Pension
It’s a complex subject, but if you’ve let interest in your pension wane over the past year, now is the perfect time for a refresh. “You’d be amazed how many people don’t know anything about their pension plan,” agree the MoneyPlus features team at Standard Life. One in three people don’t know how much they should save into it, and one in five don’t know how much is currently in them, according to a recent survey, they say. “To find out about yours, you may need to go online and create a login with your pension company. Also, do you have any other pension plans you’ve forgotten about or lost track of, from previous jobs or past employers for example? If so, you can use our guide to tracking them down.” Finally, if you’re considering moving them all to one place, an independent financial advisor can help you work out if that’s right for you. And while you’re at it, don’t forget to check how much State Pension you may be entitled to in the future, and when you can expect to get it.
Finally, Go On A Treasure Hunt
Finally, if you’re in the mood for a bit of fun, money coach Eileen Adamson suggests the following: “Go round the house and see how much money you can find, that you're essentially just wasting. So, cash lying down behind the sofa, cash in drawers, vouchers that you've not used, Christmas cash that you've stuck in a drawer and forgotten about, old bank accounts and premium bonds. Have a good old treasure hunt, add it all up and see how much you find. It can be surprising.” From there, consider setting up a designated place in which to collect loose change, vouchers or gifts, so you can have a rainy-day stash with which to treat yourself in the future.
For more financial advice and information visit HL.co.uk, MoneySupermarket.com and StandardLife.co.uk.
*DISCLAIMER: Anything written by SheerLuxe is not intended to constitute financial advice. The views expressed in this article reflect the opinions of the individuals, not the company. Always consult with an independent financial advisor or expert before making an investment or personal finance decisions.
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