Winter is behind us and it’s that time of the year when people give their homes a spring clean. But don’t just focus on tidying up your material possessions – take some time to clean up your finances too. It could help get you on track for the coming tax year, as well as boost your savings.
Here are ten financial tasks you can use to spruce up your finances:
1. Refresh your household budget
Even if your finances are comfortable, reviewing your budget at regular intervals can be valuable. Over the last year, your finances may have changed significantly. Perhaps you’ve switched job, taken on a mortgage, or are devoting more of your disposable income to a hobby. Giving your budget a refresh can help make sure it reflects your current circumstances. Covid-19 is also likely to have affected your budget in the last 12 months. While some have seen their income drop due to being furloughed, others have saved more due to spending less. In fact, spending stalled at around 90% the level that would have been expected in the absence of a pandemic, according to the Institute for Fiscal Studies.
2. Go through your bank statements
Combing through your bank statements can seem like a tedious task but you could discover significant savings. Keep an eye out for subscriptions you’re no longer using, protection for products you don’t have anymore, and other things you can cut out. While you’re doing this, it’s also worth researching how regular items, such as electricity or the internet, may have changed over time. If a deal has come to an end, you may find you could cut outgoings by switching to a competitor. Comparison platforms make it easier than ever to find out if you could save by switching.
3. Check your tax code and allowances
With a new tax year starting in April, spring is the ideal time to review your tax liability. When was the last time you checked your tax code on your payslip? An error could mean you’re paying more tax than necessary. It’s also important to check you’re making use of tax allowances. Money Saving Expert, for example, estimates that 2.4 million qualifying couples are missing out on a tax break because they’re not making use of the Marriage Allowance.
4. Search the market for a home for your savings
When your money is held in a cash account, it will usually benefit from interest. While interest rates are low, it’s still important to search the market to find an account that offers you a competitive rate. It helps your money to go further and can help reduce the impact of inflation over the long term. Keep your financial plan in mind too. While a fixed-term ISA where your money is locked away for a defined period may offer the best interest rate, restrictions may mean it’s not the right option for your goals.
5. Don’t forget about your debts
While weighing up interest on savings, you should do the same with debts. Whether it’s a loan or a credit card, the interest rate on debts affects how much borrowing costs you. Reviewing this can help create a budget and identify where savings can be made. Depending on your credit score and financial position, you may be able to switch to a low-interest or even transfer your current balance to a 0% interest credit card to make savings. Not only could it cut your outgoings, but you may also be able to pay off the debt sooner.
6. Check your mortgage
A mortgage is often one of the largest debts we take on, but it can slip your mind when reviewing other types of borrowing. If your deal has ended or comes to an end soon, you should search for a new mortgage deal. Usually, at the end of a deal, you’ll be moved on to your lender’s standard variable rate (SVR), which is typically higher than alternatives. Previous research has indicated that a quarter of mortgage holders are paying the SVR, potentially adding £4,000 of additional interest to payments each year, assuming a SVR rate of 3.53% compared to a the lowest two-year fixed-rate deal offered when the research was conducted at 1.26%.
7. Read your protection policies
If you have financial protection in place, take some time to read through your policies and check they’re still suitable for you. If you don’t have any protection in place, now is a good time to think of life insurance, critical illness cover, income protection or other protection that could improve your financial security. A report from Schroders Personal Wealth suggests that when it comes to managing finances, many Brits are falling behind in preparing for the unexpected. This is despite 43% of people saying that ensuring their family had enough money if anything happened to them was important for financial peace of mind. Life assurance plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.
8. Assess your pension performance
Retirement might be decades away or you might already be taking an income from your pension but reviewing retirement savings can help make sure you’re on track. Looking at investment performance is important. However, keep in mind that volatility is part of investing and should play a role in your investment strategy. Focus on your long-term goals and whether you’re taking steps to reach them, from contribution levels to managing withdrawals.
9. Set out your goals
When we create a financial plan, it’s built around aspirations. This helps ensure your finances are ordered in a way that reflects long-term goals. Taking some time to think about whether your goals have changed at all in the last year can identify if any adjustments need to be made.
10. Book a meeting with us
Finally, regular reviews with your financial planner can ensure everything is on track. Please contact us to arrange a meeting.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
