Spring clean your finances
With the weather warming up and days getting longer, now's a perfect time to get yourself motivated to make changes. So, here’s a simple springtime challenge for you...
Pick one of these 10 suggestions and decide to take action on it. If it helps find a friend or partner, pick a task you both need to do and do it together. Sit down one evening, open a bottle of Malbec and browse price comparison websites together. Or take turns to help sort each other’s paper mountains over a packet of chocolate biscuits.
Do whatever you need to do to make the tasks more palatable and then decide on one action - one small sweet step at a time. Never underestimate the power of doing what you say you’ll do…I guarantee it will put a spring in your step.
So, are you ready...?
1) Get your paperwork in order
You can’t beat the feelgood factor of having your paperwork in order. Piles of paper can make overwhelming mountains out of administrative molehills. Sorting it out is often just a question of getting a good system in place – it’s the dithering and agonising over where to put something that often makes us put off the whole task. So think what small steps could help make filing a doddle of a daily habit. One idea is to create clearly labelled, separate files in transparent wallets for each account and keep them somewhere safe and accessible. This also applies to documents stored on your computer or in the cloud, where you can create folders and subfolder, so everything is easy to find. All this is especially important if you have your own business. This is the time to organise receipts and gather your paperwork for the end of the tax year. If you get your return done now you’ll have plenty of time to plan for the next big tax bill (in January 2023) and you may save on accounting fees – some accountants charge less if you get your returns in early.
2) Start saving
If you’re not already a regular saver it’s time to get the saving habit. Set up a system, whether it’s £50 a month transferred to a savings account, or even a tenner in a tin! The important thing is to save by default rather than waiting until you feel you have enough to save, as that feeling may never happen. There are also some great apps which help you build a savings habit. Some allow weekly payments, pay day bonuses or 'save the change' options (rounding up each spend to the nearest pound), which encourage you to save without much effort or feeling the pinch.
3) Check your interest
It’s in your interest to keep up to speed with interest rates on savings accounts or Cash ISAs. If you’ve got old savings accounts that pay low rates it’s worth transferring your money to an account that gives you more. Many accounts lure you in with introductory rates that disappear afte a while, so don’t fall into the trap of sitting tight on old accounts. If you have enough saved as a back-up reserve and to meet any short-term goals, now's the time to start thinking about trying to get better returns by investing in the stock market. While Cash ISAs earn you interest, inflation nibbles away at your money in terms of purchasing power. Whereas Stocks & Shares ISAs, for instance, have the potential to generate far greater returns through dividends and capital growth. Check out websites like Boring Money, Money to the Masses or Meaningful Money for ideas on how to invest your cash to generate higher returns.
4) Deal with debts
If you have any debts, now’s a great time to sit down and work out a payment plan to clear them. Make a list of everyone you owe money to, how much you owe, the minimum payments you’re currently making to each and the rate of interest you’re being charged. Most people who take out a loan to repay their debt end up accumulating further debt within the year. So I'm much keener on the principle of snowballing it. Here's my snowballing video, which takes you through this snowballing method, using a great tool to help you work out a plan to become debt-free. Seek free debt advice services, such as StepChange, if you're unable to afford your debt repayments.
5) Review your mortgage
It’s time to review your options – maybe arranging an appointment with a mortgage broker to assess whether your current mortgage arrangements are still right for you. For example if you’re on a standard variable rate deal, would now be a good time to switch to a fixed or tracker rate mortgage? Or if your mortgage is interest only, could you now switch to repayment? If you’re struggling to afford to meet the extra repayments, find out if your mortgage lender will allow you to overpay the loan without penalty, so that way you could at least build up funds towards the cost of the mortgage itself and not just the interest. This can be a good half way house if you don’t feel able to make the monthly commitment of a repayment mortgage. The important thing is to do something towards eventually repaying your mortgage, even if that is building up savings or arranging an investment that could build to a lump sum to repay the loan.
6) Review your net worth
Your net worth is like a financial report card, enabling you to take stock of the complete picture of your finances rather than just seeing one aspect. It gives you a figure that is the total value of your property, pensions, savings and investments, minus any mortgages, loans, credit cards or other debt – and you can calculate it using my ‘Net Worth’ worksheet. This figure gives a valuable perspective to check in with yourself, comparing where you stand from one year to the next; and to make, and keep track of, your financial goals.
7) Review your energy and phone supplies
They’re banking on the fact that few of us do this. We’re often put off by thinking it’s going to be a daunting, time-consuming and complex task. But there are plenty of websites and online tools that make comparisons easy. Sometimes it’s just about negotiating the best tariffs with your current suppliers. Or haggling with them over the price, quoting prices offered by competitive suppliers. Compare deals for utility bills by visiting www.uswitch.com or Martin Lewis' Cheap Energy Club. And consider ways to mitigate the hike in energy prices by discovering 102 energy-saving tips for your home.
Compare the latest mobile phone bills via moneysupermarket.com/mobile-phones and ensure you understand your phone tariff so you’ll be less likely to go over your allowance. Or take a look at Martin Lewis’ website to review cost cutting ideas.
8) Check your credit rating
It’s good to do this once a year so that you know for sure that everything is ok on your record. Don’t wait until you have to borrow money as you may then not have time to address any mistakes or problems. It is possible to check this without being charged through a 30 day free trial with an online credit reference agency such as Experian, Equifax or TransUnion. Or, for a thorough view of your credit report and score simultaneously from four of the main credit reference agencies (Experian, Equifax, TransUnion & Crediva), try CheckMyFile's free trial. But be sure to read the small print and beware of the trap - it’s easy to sign up for the free trial and then forget to cancel it within the 30 days (and they don’t make it easy, it’s not a direct debit and you have to phone or email to cancel it).
If you think you’re unlikely to cancel, it could make more sense just to refer to Which?'s article on this and apply for one of the free credit scores.
9) Track your spending
You can use a notebook and pen, a spreadsheet for the tech-savvy, a simple app like Money Dashboard or an app linked to your bank. However you want to do this is fine. The important thing is to understand where your money is going. Only then are you able to start taking control of it. You don't have to work to a budget, but you might want to create some spending rules or principles which make it easier for you to achieve other goals like paying down debt or building up your savings,
10) Find time for your finances
Last but most definitely not least, schedule some time each week or each month to devote to your financial housekeeping. Just like the physical housework, it’s the compound effect of small, regular efforts that can make a massive difference. With money, achieving your goals is normally not about how much you earn but how you control your cash and this regular attention could mean the difference between a comfortable retirement or trying to live on a State pension. So give it a regular slot in your diary, to check your bank balances, review, diarise, prioritise, and decide when you’ll do the rest of these spring cleaning tips…!
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