Spring Clean Your Finances
Spring has sprung beautiful people! It’s that time of the year when we mow our gardens, and spring clean our homes ready for a HOT (maybe) summer.
Side note: As I put this blog post together this morning, it began snowing! So here in the UK we ended Q1 with snow for a second year in a row!! So we might have to keep our winter coats out just a little bit longer…
There’s plenty of advice and ‘life hacks’ on how to make spring-cleaning less of a chore. A quick Google search will throw up hundreds of random tips – like using cola to clean the toilet (<< that’s one reason I don’t drink cola anymore), lemon to clean the taps and vinegar to clean just about anything!
When you’ve finished scrubbing your worktops with baking soda and polishing your windows with newspapers (I use newspapers for mirrors too), why not try spring-cleaning your finances? Here are some handy hints to get you started:
Throw away unnecessary spending habits
Look at your bank statements for the last 3 months of the year for a snapshot of your finances. It can help highlight any problem spending areas and where you can potentially make savings.
Do you have countless direct debits or standing orders? Is there anything you’ve signed up for that you no longer use? Those small payments going out every month can really add up! If you have credit cards make sure you pay them off in full each month, or if not see if you can shift your debts to a lower interest credit card or loan. Just to give yourself space to gradually pay it off without incurring huge amounts of interest.
2. Invest in an ISA
An Individual Savings Account (ISA) is a tax-efficient way of saving. In the current tax year (April 2022 to April 2023) the government allows us to put up to £20K into an ISA. Make sure you take advantage of this before the tax year ends in April 2023.
You can save your money in a Cash ISA or Stocks and Shares ISA or split the allowance across both types. A Cash ISA you don’t pay tax on the interest you make on these savings. With a Stocks and Shares ISA means you don’t pay tax on any income or capital gains you’ve made on your investments - but obviously this involves more risk.
There are a few other things to bear in mind. The tax efficiency of ISAs is based on current rules. The current tax situation may not be maintained. And of course, the benefit of the tax treatment depends on individual circumstances.
With Stocks and Shares ISAs, although there is no fixed term you should consider them as a medium to long term investment, of ideally five years or more. And remember, the value of your Stocks and Shares ISA and any income from it may fall as well as rise. You may get back less than you invest.
3. Review your protection
Spring-cleaning your protection insurance is also important as you’ll want to make sure you STILL have the right cover for your family and your lifestyle.
A recent report showed 14 critical illness providers have updated their policy definitions since 2018 without upgrading existing customer cover.
If you’re renting a property you will want to protect your belongings with home contents insurance. If you have just bought a home, you’ll need to make sure both your building and possessions are adequately covered. You should also think about accidental damage cover or home emergency cover.
If you have others who depend on your income, consider taking out cover to provide financial security for them should you become ill or die. Life insurance and critical illness insurance may give you the peace-of-mind that you or your family could cope should the worst happen.
4. Create a Spending and Saving Plan
To get started, use your bank statements to analyse your spending patterns and tally up your typical monthly outgoings. Compare this to your monthly income and you can quickly see what’s left (or not) by the end of the month.
Once you’ve done this you can create for yourself a spending plan based on accurate figures. Keep it realistic as you’re more likely to stick to it.
5. Check on your mortgage
If you’ve got a tracker, fixed or discount rate mortgage, make sure you know when it ends as you’ll likely be switched to your provider's Standard Variable Rate (SVR). The SVR is usually higher than the amount you’ve been paying and when interest rates change, so can your monthly payments.
It’s worth finding out what alternative products your current mortgage provider offers before checking out the rest of the market.
6. Watch your energy bills
April 1st 2022, marked the increase in the energy price cap for most UK resisdents. So if you are on a default tariff through direct debit the amount you pay will increase. So more than ever it’s important to make sure you shop around once your tariff ends to ensure you are getting a good deal.
7.Get trusted advice
Discussing your finances with an expert can make managing your finances simpler, easier and less overwhelming. I can help you establish a financial roadmap that’s designed around your specific needs, makes sure you stay on track, and provide ongoing support that will help you achieve your goals.
If you would like to find out more about how to take control of your finances this year, please get in touch for a review.
