As the days get longer and warmer, many of us carry out a traditional ‘spring clean’ on our homes and gardens. It is a good time to look at our money as well, especially with the prospect of a new tax year in sight.
Streamlining and tidying your finances makes it easier to budget, save and invest for the future, as well as minimising the danger of fraud on forgotten accounts and credit cards. Here are some of the most impactful steps you can take this month to ensure your wallet is as sparkling as your spring-cleaned home and garden.
Prune back your bills
We all have unavoidable monthly bills going out of our bank accounts to pay for essential services like council tax, energy and broadband. Many of us have discretionary monthly bills for services like Netflix and the local gym as well.
These bills tend to rise with inflation, and you may not be using all of the discretionary services to their full effect, so now is the time to look at where you can cut back. Big savings can be made on monthly mobile phone bills if you are out of contract and happy to look for a SIM-only plan, with lesser-known carriers such as Lebara and Lycamobile offering particularly cheap deals.
You may also be able to save on your broadband if you are at the end of a contract, with many providers offering introductory deals. Websites such as Broadband Choices https://www.broadbandchoices.co.uk and Uswitch (www.uswitch.com).
This is also a good time to review your other subscriptions. Streaming services such as Amazon, Netflix and Disney+ can be stopped and restarted without any penalty, so it may be worth reviewing which ones you are using at present and stopping any that you do not.
Clean up your wallet
A look in your wallet (whether real or virtual), is likely to reveal a large number of cards that you never use. Some of these will be credit cards, while other loyalty cards and gift cards should also be scrutinised as part of a spring clean.
Cancelling credit cards that you don’t use leaves you less exposed to fraud, but may paradoxically worsen your credit rating as you will be using a greater percentage of the total credit that you are allowed in total if you cancel some cards. This is unlikely to be a problem unless you have other credit issues as well though.
Now is a good time, though, to consider whether your credit cards are giving you the best benefits. If you pay off your balance every month, credit cards that give points or cashback can reward you for your spending, and there are new offers available all the time.
Try a cashback credit card to have a simple percentage of the amount you spend added to your bill (Moneysupermarket have a list of cards here) or something like the American Express Preferred Rewards card, which offers points on spending that can be redeemed for shopping or travel, as well as up to four airline lounge visits each year. This has an annual fee but is free for the first year.
The golden rule with all of these cards is to pay off your balance every month, otherwise the interest will dwarf your perks.
With loyalty cards and gift cards check whether you have points on them to use. Gift cards expire and it is easy to leave them to languish. If you’re really not going to use them, sell them to others who will online at cardyard – you will lose a percentage of their value but you’ll be rewarded with cold, hard cash.
Tidy your accounts
If you’ve opened up ISAs and savings accounts throughout your life, chances are you’ve got money scattered across a large number of financial institutions. Not only is this hard to keep track of, it is also unlikely to be keeping pace with inflation, since most old accounts end up with interest rates dropping to levels as low as 0.1 per cent.
Make it a mission to track them all down and transfer them to better-paying institutions. If they are ISA accounts, you’ll need to transfer them without withdrawing the money, or it will lose its tax-free status. You can transfer cash ISAs into stocks and shares ISAs and vice versa, and you arrange this with the new provider, who will contact the old one and arrange the transfer on your behalf.
For the best cash ISAs check https://moneyfactscompare.co.uk/isa/. You will want to check ISAs that allow ‘transfers in’ if you are tidying up your accounts.
With other savings accounts, it’s an easier matter of withdrawing your money from one and depositing into another. You’ll get a better rate if you can tie up your money for several years, and again you can check for the best rates on Moneyfacts.
Always remember that your money is only protected under the Financial Services Compensation Scheme up to £85,000 per person, per institution. If you have more than this, you should spread it between institutions for safety.
Find all of your pensions
Retirement planning should be part of your spring cleaning process, since it’s easy to lose track of past pensions. Many of us have had several employers in our lifetimes, meaning that we have pensions that we may have forgotten about.
Ensuring that you know where they all are is the best way to discover what you have, which means writing to pension trustees at all of your former employers, and, if you cannot find the pensions this way, using the Pension Tracing service from the Government (https://www.gov.uk/find-pension-contact-details).
Some providers will encourage you to consolidate all of your pensions in one place, to make them easier to manage. This may be a good idea, especially if you have many small pensions and are paying high charges. However, in some cases pensions come with valuable guarantees such as Guaranteed Annuity Rates – and if you transfer out you will lose these guarantees. If you are not sure, see an adviser before making decisions like this.
Now is also the time to check your national insurance record, to check you have the qualifying years of you need for your state pension. You’ll need your Government Gateway ID for this, or to set one up. If you do not have 35 years of qualifying contributions you will not get a full state pension, but it is possible to ‘buy’ extra years to ensure you get the full benefit.
There is a time limit on this though. For missing pension years between 2006 and 2016, you will need to claim before July 31 2023. Start here to check your NI record and find out what to do next.
Put your best foot forward
After you’ve put these spring cleaning steps in place, put some extra time into ensuring your finances stay squeaky clean for the rest of the year. Good moves include putting in a direct debit into a savings account on payday and making a note of when contracts end on other financial products, from broadband and mobile contracts to mortgages, so that you are prepared to sort them out in plenty of time.
Budgeting apps such as Emma, Plum or Money Dashboard can help you to see all of your money at a glance and automate savings, or you can simply use the features on your banking app to put money into separate pots, siphon off extra cash for savings and alert you if you are nearing your overdraft.
24th March 2023