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Spring into Action now
Spring into action
It's been a long, cold winter, but spring has finally arrived. So is it time you spring cleaned your finances?
The practice of spring cleaning is thought to have originated in ancient Iran, where the home would be thoroughly cleaned before the Persian New Year (the first day of spring). It became popular in Northern Europe due to our cold, wet climate: before the invention of the vacuum cleaner, spring meant it was finally warm enough to open the doors and windows and start shaking down the dust.
Spring cleaning may now be an outdated custom, but dusting down your personal finances and conducting a yearly review of your financial situation is a good habit to adopt – it could literally save you thousands of pounds.
Six money matters you should never ignore
It's important to review six key areas of your finances, and also to seek advice from professionals such as solicitors, accountants and financial advisers.
1. Managing your debt
Reviewing your debt such as credit cards and loans may seem like an unpleasant task, but time spent now could save you money . Websites such as moneysavingexpert.com help you find the best credit cards and loans around – for example, it may be worth switching any debt to a 0% credit card to make sure you're paying off as much as possible each month.
2. Saving for the future
If you can budget so that you're spending less than you earn, and put even a little of that money into a savings or retirement account before you have time to spend it, you will be able to save money and build wealth.
The first step has to be to set yourself a monthly budget. Research by Visa Europe in 2010 shows that on average Britons spend over £2,000 a year on items they haven't budgeted for*, so try keeping a log of all your purchases, including the small ones. They soon add up.
3. Making your money work for you
Keeping your savings in a bank or building society can potentially cost you money over the long term. In a low-interest environment inflation can erode the buying power of your capital, leaving you with effectively less than you had before. You could seek professional advice to see how you can make your money work harder for you.
4. Planning for retirement
Are you concerned about maintaining your lifestyle once you've retired? With the average retirement in the UK now lasting over 20 years, it's more important than ever to make sure you're financially prepared.
An individual pension plan is a flexible way to save for the future: it belongs to you, so you can keep contributing to it if you move jobs, and other people can also pay into it to help you build up your fund. When you retire, this fund can be used to give you a regular income, plus an optional tax-free cash sum (normally up to 25%).
Individual pensions aren't suitable for everyone. For example, if you have access to a company scheme you may be better paying into that. A financial adviser can help you to choose the best option.
5. Making a will
Writing a will is good forward planning: it will help make sure that your affairs are dealt with as you would want after your death, and minimise the difficulties facing your family and other dependants. However, many people die every year without having made a will. This situation – known as ‘intestacy' – can present a number of problems and potential pitfalls for the person responsible for sorting out the affairs of the deceased.
The Directgov public services website has practical information on making a will. However, you should also seek advice from a solicitor.
6. Protecting your family
Have you considered whether you have enough protection in place in case of an accident or ill health? Could you and your family maintain your current lifestyle if you couldn't work? If not then perhaps it's time to have a conversation with a financial adviser, who can talk you through the options available to you.
To give you a head start, you should map out your financial journey. You can use this to identify key financial milestones and the types of protection you may want to consider as you go through life.
As you can see, the time you take now to review your finances could be some of the most valuable hours you spend in 2011.
John Joe McGinley
About the Author
Action planning business consultant with a passion for Celtic
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