How to de-clutter your finances
If the Marie Kondo Netflix series is anything to go by, now is the time to clean-up and de-clutter your life. And that extends to your finances too. While we can’t exactly hold our bills and debts close to find out if they bring us joy (the answer would be no lets face it) the possibility of achieving a happier less-stressed life does sound appealing.
Here’s Portafina’s 4 step-guide to help get your money in order.
Compartmentalise your bank accounts
Just like dividing your drawers, it helps to organise your money into more than one account with your bank to get greater control and visibility.
Jamie Smith-Thompson, Managing Director at Portafina, says:
“You could consider dividing your accounts into bills, essential spends and savings to have a complete overview of your money. After all, it makes complete sense not to keep holiday savings in with the money you use to buy food, or to keep either in with the funds you use to pay the bills. Money you are putting away for a holiday is certainly better placed in an ISA or savings account where it can gain a small amount of interest and is best left untouched until you need.”
Compartmentalising your accounts in this way is easy when you utilise your bank’s mobile app. At a tap of a button you can usually move money between accounts and most importantly keep track of your spending.
Review your bills and direct debits
You can use your mobile banking app to review your direct debits and standing orders. Taking 5 or 10 minutes to check over what’s coming out of your bank each month could prove to be a real eye opener. It might shock you to discover how much you’re paying for TV, broadband or your mobile phone contract. Take time to consider whether you are getting the most out of these packages and look to reduce your tariff and save money where you can.
When you receive any insurance renewal notices, check to see if your payment has increased. If the price has gone up it’s easy to shop around for a better deal using a price comparison site.
When it comes to making sure the bills get paid, Jamie says:
“Arrange for all your bills and direct debit payments to be taken just after pay day. This will mean you can quickly establish how much money you have left for the rest of the month. The biggest benefit of this is your bills will always be paid first, which means you avoid the stress of falling behind with payments.”
Throw out the debt
It’s a great feeling to clear a debt once and for all. Making small sacrifices and lifestyle changes to give you a bit extra to put towards the debt will be a big help.
“Instead of focussing on what you might be missing out on in the short-term, think about how good it will feel to be debt free in the longer term.”
It can feel overwhelming to know where to start, especially if you have a few debts you want to tackle. This is where drawing up a debt hit-list will help. But it’s not about targeting the largest debt first. Instead, look to the debt with the highest interest rate. Ranking your hit-list this way will mean you have more disposable money each time a debt is cleared.
If trying to tackle debt is leaving you feeling overwhelmed and stressed, there are debt counsellors who can support you through the really tough times.
Bring joy to your future self
“While it’s great to get your finances organised so you can enjoy the here and now, it’s worth thinking about your future too.”
If your retirement is 20, 30 or possibly 40 years away, it’s understandably difficult to picture what life is going to be like in the future, or how much you might need. However, there’s no time like the present to save for the future. And the sooner you start the more you will have when you really need it.
Knowing where to start
If you are employed, aged 22 and over and earn more than £10,000 you will have been automatically enrolled into a workplace pension scheme. And from April 2019 a total of 8% of the value of your salary will be paid into your pension pot (5% comes straight from your salary and tax-relief, with 3% from your employer). This is great news especially if you don’t already have any retirement savings.
You can find out more about auto-enrolment and why opting out of a workplace pension scheme could cost you thousands here.
What about the State Pension?
The State Pension age is currently mid-sixties for men and women and we know it is going to continue to rise. If your retirement is a long way off, the age you receive your State Pension age could be a lot higher. If you aren’t planning on making any additional provisions for your retirement, you should consider whether the State Pension would be enough for you to live comfortably on. Take a look at our helpful fact sheet on the State Pension. You can find out the difference between a State Pension and private pension here.