Our head of pensions and savings shares some of her top tips for keeping your finances in order.
Spring has sprung; the daffodils are out – and a new tax year is about to begin on 6 April.
What better time to adopt the spirit of Mrs Beeton and start moving the furniture around a little?
Of course, you don’t have to wait until the clocks go forward to whip out the metaphorical feather duster and clear away cobwebs from the corners of your various accounts. Tidy finances are something to aspire to all year round.
Here are some tips to keep your finances as orderly as an Ikea hallway:
1. Sort your storage: or rather, your savings accounts. Check you have the right amount in the right accounts. Have enough to cover Christmas, holidays and any other imminent outgoings, or possible emergencies, in an easy access account. Anything for the longer term can go into fixed rate accounts or one, three or five-year bonds.
Remember you have an ISA allowance at your disposal of £20,000 for the tax year and you have a number of types of ISA to choose from. There are cash ISAs and stocks & shares ISAs, but also innovative finance and Lifetime ISAs. Consider the right level of risk for your money ‘pots’ as you divide them up by time frame and purpose.
2. Shuffle things around: you can’t get at the dust if you aren’t prepared to move the sofa. By dust, we mean nasties like low interest rates that might be lurking on some of your accounts and resulting in your cash pots losing money due to inflation.
Be ready to move your money to higher paying alternative accounts or even to investments, depending on your time horizon.
3. Turn the mattress (and check it for broken springs): with the investments in your portfolio, the same applies. Review your underlying investments to check you still want your money going into the stocks, funds, trusts or exchange-traded funds (ETFs) you may have chosen long ago.
Rebalance if you are concerned your original asset allocation has gone off-piste a little, for example, you may feel you have invested too much equities in the last 12 months and you want to scale back.
4. Chuck out any clutter: if you simply have money in too many places, consider which place is no longer offering you good value or a good return and consider if you still need it. If you are doubling up on ISA, pension providers, or savings accounts, unnecessarily, consider consolidating. Check that doing so doesn’t bring you over the limit for Financial Services Compensation Scheme (FSCS) compensation cover if you are moving all your savings to one place.
If you hold money with a UK-authorised bank, building society or credit union that fails, the FSCS will automatically compensate you up to £85,000 per eligible person, per bank, building society or credit union, up to £170,000 for joint accounts.
Moving your ISA or pension to one platform should not incur any fees, and you can save yourself a lot of money over the long term by moving your money to a platform with lower charges. Having more of your money in one place, whether in ISAs or pensions, can make keeping track of things much easier. You are less likely to forget about old small pots or cash ISAs you opened 20 years ago.
5. Be sparing with ornaments: as above, if you have more than one app for budgeting, saving or banking which do roughly the same thing, ask yourself whether you need all of them hogging space on your phone?
If you have any small deposits with accounts or apps that you rarely log in to, do yourself a big favour and move that little bit of cash somewhere you are going to do something with it, even if that’s your current account. There’s less chance of it languishing, forgotten, in there.
6. Share the load: many hands make light work when it comes to a good ‘sprottle’, and the same is true with household finances. If your partner has some unused ISA allowance, or could maybe add a bit more to their pension, don’t forget to encourage them to make the most of their tax-free investment incentives, too. To make the entire family’s money work harder, everyone’s spare cash needs to be kept as tax-efficiently as possible.
7. Step back and take a holistic view: all of your financial products need to be working together – that means also reviewing your current account provider, energy supplier, insurances and your mortgage and other borrowings too.
Once you’ve got the best deals possible across the board, create a new budget based on your new (hopefully lower) outgoings. If you’ve created enough space, you can even consider increasing your regular saving, investment or pension contributions.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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