Spring is in the air, but is there all the money there should be in your pocket?
It’s easy to get into bad financial habits that cost you money without even realising it. Giving your finances a regular check over can make a big difference not just to your everyday cash, but to your long term outlook. A few pounds saved now could leave you thousands better off in a few years’ time.
Step 1: Work out where your money is going
You can’t get your finances looking better if you don’t have a clear picture of what’s wrong with them now. So, you need to start your money makeover by getting the evidence.
Gather together your last three months’ worth of bank statements. If your bank has stopped sending you a paper one every month you may need to print them off yourself, or go into a branch and ask for them.
Assemble all your household bills. Electricity, gas, water, phone, broadband and any TV services. If you have online accounts you should be able to check what tariff you are on, and precisely what you have consumed and how much you are paying. You will also need your phone and broadband bill, and the statement for any TV services you use.
Find the bill for your mobile phone. See what tariff you are on and how long your contract lasts.
What about debts? Dig out credit card statements. How much do you owe and what are you repaying each month?
Get details of all insurance that you have. Building and contents, car, travel, mobile phone, pets and any medical or life cover.
Step 2: Investigate.
Until you know what you really spend, you’re not really in charge of your money. So, start by looking at your outgoings on your bank statement. Recognise everything? Are you still paying for things like membership of a gym you never go to, or for an extended warranty on a laptop you binned years ago? Many people are surprised to find they are – the businesses you are paying will not be in a hurry to tell you.
Cancel all the unwanted extras right away. Every little counts.
Step 3: Shop around
Once you know what you are paying out, and are satisfied that you need what you are paying for, it’s time to shop around. You need the best deal on everything – utilities, insurance, your mobile phone. Comparison sites are a great place to start. The chances are that a few hours work finding the best deals and swapping providers could save you hundreds of pounds.
Just remember to keep an eye on your arrangements. Some companies may have a great introductory rate to tempt you in, which goes up after the honeymoon period. Be prepared to swap again.
Step 4: Deal with debts
Most of us have debts to deal with. It’s easy to run up a balance on a credit or store card, but it’s much harder to pay off. If you pay the minimum every month, the interest will keep on growing, and there’s always the temptation just to buy something else.
Debt could be the biggest drain on your resources. It may come as a shock to see how much you actually owe when you add it all up.
Card debts usually have high interest rates. See what you are paying on each card. It makes sense to pay off the most expensive first.
This is easier said than done, so consider transferring your balances to a card offering 0% for balance transfers or consolidate all your debt into a low-cost personal loan. The discipline of paying off each month can be difficult at first, but sooner or later it will mean you can be debt free – especially if you cut up the cards that started the problem.
Step 5: Start making money
You probably can’t expect to get rich by making your spare cash work for you, but you can find you build up enough for a few little extras.
Start with your bank. If you are not getting interest on your current account – or worse, paying a monthly fee for extras you don’t use, you might consider switching to an interest paying current account. They may not actually pay that much on your balance, but every little helps and it makes more sense than you paying the bank for looking after your money. Most banks will expect you to pay in a regular monthly sum of between £500 and £1,500, as well as setting up direct debits to qualify.
Then, if your money makeover has left you with a little extra at the end of each month, you should consider how you will use it. There are many savings plans available. Some offer instant access, making them perfect for stashing any cash that you might need in an emergency.
Once you have an emergency fund, what then? For many people a Cash ISA can be a good choice for long term savings. You can pay in up to £20,000 a year, and all the interest your money earns will be protected from the taxman for life.
Getting some help
Once you’ve given your finances a spring clean, it might be time to think of the best ways to manage your money going forward. A call to the Continuum team could let you discuss savings, pensions, tax, or any other aspect of your finances.