September 21st, 2020
10 ways you can spring clean your finances
Each year, the Great British Spring Clean encourages people to organise group clean-ups of local public spaces, picking up litter, and recycling rubbish to make spaces more environmentally friendly and enjoyable for everyone.
Like many other events this year, it was postponed in the wake of lockdown, but finally goes ahead this September.
Much like our parks and town squares, your finances may have suffered from a lack of regular maintenance over these past few months. With life settling back down, now is a good time to do some financial tidying up of your own.
Follow these ten steps to spring clean your finances.
1. Organise your documents
The first step to any good clean-up is knowing where to start.
Track down all your financial documents to help you get organised. Find your bank and pension statements, insurance documents, and any other important financial information. Organise them in a way that helps you stay on top of what you have and remember where to find important information.
If you find yourself swamped by files, folders, and loose documents, consider going digital. These days, most banks and other financial service providers offer paperless statements and contact via email.
2. Prepare for emergencies
Creating an In Case of Emergency (ICE) document for your finances can be an invaluable resource. It is useful should you ever find yourself in a situation where you need someone else to deal with your affairs when you can’t. You can create one by collecting copies of all your important financial details and important contact numbers.
Include this information in your ICE document:
- Property and car ownership records
- Insurance policies
- List of all bank, investment, and pension account numbers
- Proof and details of your current income, such as a P60
- Details of outstanding mortgages and other loans
- Contact details for your insurers, banks, and financial advisers
- A list of locations for where your original paperwork is stored.
Compile all of these in a single folder and store it somewhere that’s easy to find. Also create a digital backup copy to keep on a USB stick or saved in secure cloud storage.
Finally, let your family, friends, and financial advisers know where your ICE document is stored and what it contains, in case they ever need to access it.
3. Assess your expenses
Going over your bills regularly can reveal ways you could cut down on your spending. For example, check if paying utility bills quarterly or annually rather than monthly could generate a discount, or if there’s a cheaper tariff available for your home or business energy.
Reviewing your direct debits could also save you money if you cancel payments that you have set up but no longer need. In particular, look out for gym memberships you don’t use, multiple streaming services, and insurance on products you don’t own anymore.
Finally, think about switching your bank account. If you’re being charged too much or not getting good service, you could be better off with another provider.
4. Review your savings
Have you been saving more during lockdown? Think about what to do with any surplus money you may have. Do you have enough money in your emergency fund? If 2020 has shown us anything so far, it’s that it pays to have three to six months’ expenditure readily available.
Whether you’ve saved more during the year or not, make sure to check the interest rates on your savings accounts. According to Moneyfacts, the average easy access saving rate was just 0.22% in August, so you might improve the return on your savings by shopping around for a better interest rate.
5. Check on your Cash ISAs
The interest rates on Cash ISAs have also been affected by the low Base rate, so it pays to check on yours. This Is Money reports that the average Cash ISA rate fell from 0.96% in March to just 0.37% in July, so it’s worth shopping around to see if you’d benefit from a better return.
Remember to transfer your ISA rather than withdrawing the money and reinvesting it, as transferred money won’t count towards your annual ISA subscription limit.
6. Check your protection
Review the life insurance, critical illness cover, and income protection you have in place.
Think about whether the insurance you have is sufficient to provide the peace of mind you and your family need. If you’ve recently got married, had a child, or made any other major lifestyle changes, it’s particularly important to check that your protection is still enough.
7. Review your investment portfolio
After the Covid-19 induced market volatility, reviewing your investments is a good idea.
Look at the performance of your investments to ensure that they still support your goals and remain in line with your tolerance for risk.
If you’re worried about your investment performance or want to make any changes, your financial adviser can help you make sure your investment portfolio remains appropriate for your goals.
8. Check on your pensions
Particularly if you’ve changed jobs recently, it pays to track down your pensions so you don’t lose track of your savings. If you’ve lost touch with your schemes, you can use the government’s free Pension Tracing Service to find the contact details for any schemes you may be a member of.
While reviewing your retirement plan, also remember to include your State Pension. You can use the State Pension forecast to check how much you’ll be eligible for.
If you have multiple pensions, you could think about consolidating them to simplify their management. Just make sure to consider all the benefits and potential downsides of this before proceeding. Your financial adviser will be able to help you choose the right course of action.
9. Set up a Lasting Power of Attorney
If recent events have made you worry about your future, having an LPA in place can give you some peace of mind. It can ensure that your personal and financial affairs are managed according to your wishes if you’re ever incapacitated by illness or an accident.
There are two types of LPA. A Health and Welfare LPA can give someone the authority to deal with your daily life and medical care, while a Property and Financial Affairs LPA allows your attorney to handle your finances.
You can put just one or both types of LPA in place and can restrict the attorney’s authority to dealing with only certain matters. Consult your financial adviser about this so your LPA is written exactly as you wish.
10. Review your estate planning
You should take some time to write a will. It is the only way to make sure that your assets go to the people you want after you pass away, and allows you to make careful arrangements for your children to ensure they will be cared for.
Even if you’ve already made a will, when was the last time you updated it?
Finally, make sure you have a separate Expression of Wish form in place for each of your pensions to specify who should receive any pension benefits in the event of your death. Contact your pension provider to arrange this.