Spring Clean Your Finances

There’s plenty of advice and ‘life hacks’ on how to make spring-cleaning less of a chore. A quick Google search will throw up hundreds of random tips – like using cola to clean the toilet, lemon to clean the taps and vinegar to clean just about anything! When you’ve finished scrubbing your worktops with baking soda and polishing your windows with newspapers, why not try spring-cleaning your finances?

Throw away unnecessary spending habits

Look at your bank statements for the last couple of months for a snapshot of your finances. It can help highlight any problem spending areas and where you can potentially make savings.

Do you have countless direct debits or standing orders? Is there anything you’ve signed up for that you no longer use? Those small payments going out every month can really add up! If you have credits cards make sure you pay them off in full each month, or if not see if you can shift your debts to a lower interest credit card or loan. Just to give yourself space to gradually pay it off without incurring huge amounts of interest.

Make sure you have the right tax code Now that the new tax year has started, it is worth checking your tax code if your earnings and/or pensions are taxed under PAYE. HMRC does not have an unblemished record of setting these correctly and, unless you complete a tax return, you could end up paying tax that you cannot reclaim – you have just missed the chance to receive a refund for overpaid tax from 2017/18. Go to www.gov.uk/check-income-tax-current-year to check your code

Consider salary sacrifice to pay your pension contributions

If you are a member of a workplace pension arrangement, you may have the opportunity to make your contributions via salary sacrifice arrangements. In most – but not all – instances, this will be preferable to the more obvious method of having personal contributions deducted from your pay because of the savings on national insurance contributions that can be made. At best, your pension contribution cost could be reduced by over a quarter.

Check if you can now claim Universal Credit 

In last October’s Budget, the Chancellor announced two changes to Universal Credit (UC): a £500 a year increase in all work allowances and, more significantly, a reduction from 63% to 55% in the rate at which the benefit is withdrawn. The combination of the two meant that the income limit for UC entitlement increased significantly. You may be able to make a claim this year, which would have been pointless a year ago. For example, a single earner couple with two children paying monthly rent of £750 can have income before tax of up to £61,150 before losing all UC entitlement.

Invest in an ISA

An Individual Savings Account (ISA) is a tax-efficient way of saving. In the current tax year (April 2022 to April 2023) the government allows us to put up to £20K into an ISA. Make sure you take advantage of this before the tax year ends in April 2023.

You can save your money in a Cash ISA or Stocks and Shares ISA or split the allowance across both types. A Cash ISA you don’t pay tax on the interest you make on these savings. With a Stocks and Shares ISA means you don’t pay tax on any income or capital gains you’ve made on your investments – but obviously this involves more risk.

There are a few other things to bear in mind. The tax efficiency of ISAs is based on current rules. The current tax situation may not be maintained. And of course, the benefit of the tax treatment depends on individual circumstances.

With Stocks and Shares ISAs, although there is no fixed term you should consider them as a medium to long term investment, of ideally five years or more. And remember, the value of your Stocks and Shares ISA and any income from it may fall as well as rise. You may get back less than you invest.

Spring clean your protection

Spring-cleaning your protection insurance is also important as you’ll want to make sure you have the right cover for your family and your lifestyle.

If you’re renting a property you will want to protect your belongings with home contents insurance. If you have just bought a home, you’ll need to make sure both your building and possessions are adequately covered. You should also think about accidental damage cover or home emergency cover.

If you have others who depend on your income, consider taking out cover to provide financial security for them should you become ill or die. Life insurance and critical illness insurance may give you the peace-of-mind that you or your family could cope should the worst happen.

Set yourself a budget

To get started, use your bank statements to analyse your spending patterns and tally up your typical monthly outgoings. Compare this to your monthly income and you can quickly see what’s left (or not) by the end of the month.

Once you’ve done this you can set yourself a budget based on accurate figures. Keep it realistic as you’re more likely to stick to it.

Check on your mortgage

If you’ve got a tracker, fixed or discount rate mortgage, make sure you know when it ends as you’ll likely be switched to your providers Standard Variable Rate (SVR). The SVR is usually higher than the amount you’ve been paying and when interest rates change, so can your monthly payments.

It’s worth finding out what alternative products your current mortgage provider offers before checking out the rest of the market.

Get trusted advice

Discussing your finances with an expert can make managing your finances simpler. We can help you establish a financial plan that’s designed around your specific needs, make sure it stays on track, and provide ongoing advice that will help you achieve your goals.

If you would like to spring clean your finances this year, please get in touch for a review.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.