The arrival of the New Year often means ‘out with the old and in with the new’, whether that’s a wardrobe overhaul, a home de-clutter or a new fitness programme.
One of the most useful areas of your life to give a ‘spring clean’ however could be your finances. Post-Christmas is a brilliant time to cast a closer eye on where your money goes, as many of us will be feeling the pinch after overindulging on the presents, food and fun over the festive season. Resolving to take a few hours out to spring clean your finances means that you’ll start the new year as you mean to go on – on a firmer financial footing.
Where to Start?
Money matters can often seem overwhelming, particularly just after an expensive time of year when your bank balance is unlikely to be looking its healthiest. However, just a few hours invested in this area of your life could see you making savings immediately and throughout the year, helping to redress the balance of the end of year excesses.
Grab a cup of tea, a pen and paper, and copies of your most recent bank statements and household bills, and settle down for a good financial sort out:
There are two types of debt – controlled debt ie debt that’s manageable on your budget, and out of control debt. If you feel that your debts are unmanageable then it’s important to seek help, despite the temptation to bury your head in the sand. If you’re struggling with your repayments speak to the lenders involved as soon as possible to see if you can arrange a re-payment break or reduced repayments. You might also find that looking at your other outgoings will free up some cash, making those debt repayments less of a squeeze.
If you’re unsure of the status of your debts – ie, how many missed payments you have or how much you owe to each lender – you can do a credit check at creditexpert.co.uk to arm yourself with the facts.
If you have savings as well as debts then it’s usually wise to use the savings to reduce the outstanding balance of the debts. This is because the interest rate on debts is usually higher than any interest you would earn on your savings. However, it’s a good idea to keep some money back in case of emergencies – three month’s wages would give the peace of mind that, should the worst happen with your employment situation, or an emergency expense crops up:
- Car repairs
- Broken Mobile Phone
- New Appliance
Do you have enough in the bank to prevent it from being a complete financial disaster?
Unfortunately, many households fail to, or feel unable to, save, with a study conducted by HSBC in November 2013 revealing that 8.8 million households in the UK have less than £250 in savings. If you find it difficult to save, spring-cleaning your finances may help to save some cash to put aside for that notorious ‘rainy day’.
A mortgage is a large expense for many households, and yet the best deals are often not shopped around for. If you’re not tied into a fixed rate deal (and faced with early repayment penalties for switching) then you should take a few minutes to compare the best mortgages for your circumstances. It’s easy to let your mortgage account revert onto the bank’s standard variable rate once your deal has expired, but these are rarely the most competitive option. Banks count on apathy to up their profit margins, so be proactive in seeking out the best deals and switching!
When it comes to rent there’s nothing stopping you from negotiating on a new property or re-negotiating on your current rent. A good, reliable tenant is worth its weight in gold to a landlord, and, as the old saying goes, ‘if you don’t ask you don’t get!’ Help your case by getting together details of comparable properties with lower rents, and keep negotiations amicable. If it’s impossible to negotiate a reduction, why not ask for something else of value to you as a compromise – for example, funds to redecorate, insulation to reduce your energy bills or a useful appliance?
Fuel is a huge expense for households running one, two or more cars. Firstly, why not look at whether it would be more economical to take public transport than drive? You could also look into car sharing on the school/work/leisure runs. For essential journeys, see my previous post “Save on Petrol or Diesel – Get More Miles From Your Vehicle” included are some resources that will help you to find the cheapest fuel in your area.
It’s worth shopping around for your utilities regularly as tariffs often change. Compare tariffs online but remember to make sure that you are checking like for like (find out your usage for the most accurate comparisons). You could also look into having a smart metering device installed at home to help you to see where you can cut back on your energy usage. Good insulation and common sense energy saving practises will also help to bring those bills down.
Looking at all of the above areas of your financial life should enable you to take control of the purse strings and hopefully save money, feel better off and have greater peace of mind. However it’s often the small things that add up when it comes to looking after our money. With grocery and leisure spends shopping around for the best deals is key – a little time spent at the computer researching purchases can save £££’s. If you still find yourself regularly and unexpectedly in the red, carrying a notebook to record your purchases for a week or two should open your eyes to where your money is going.
There’s lots that you can do for a more financially fruitful new year. Spending some time spring-cleaning your money matters is sure to pay off throughout 2014.