How to spring clean your finances

 

 

Lambs with coatsFebruary can be a tough month, financially speaking. Many people will still be in the process of paying off their credit card balances that are left over from Christmas spending.

That’s why now is a good time to look at your income and outgoings and see how you can make your money work better for you.

The cost of living is on the rise

Increases in the cost of essential items like food and petrol are also putting pressure on household budgets and a quick money makeover could help you start 2018 in robust financial shape.

Here’s how to assess your own financial resilience, make provision for the future and reduce your debt.

  1. Get your documents in order

 When your filing system works properly, and you know where to find your bank statements, you will feel much more in control of your money, says Simonne Gnessen, money coaching and founder of Wise Monkey Financial Coaching.

“Buy a lever arch file and keep your receipts in a plastic wallet labelled by the month,” she says. In a different file, keep your bank and credit card statements filed in chronological order.

Keep your files in a designated place – perhaps a filing cabinet which has space for bills and bank statements to be kept safely.

“You might need to create separate folders, either physically or on your computer, for example for internet orders, utilities, bank statements, household bills.”

  1. Review your spending

 There are now lots of useful apps and software packages to help you monitor your spending.

You could try the budgeting app Mint, which syncs bank accounts, credit cards and monthly bills so you can see your net worth 24/7. You can also track specific types of purchases over time, like how much you spend on Uber journeys. www.mint.com

Money Dashboard allows you to view income and expenditure in one place, syncing credit cards, current accounts and savings. www.moneydashboard.com

You can also request your own bank to send text alerts when you are close to being overdrawn.

Citizens Advice has a useful budgeting app.

 3. Find ways to cut costs

Once your bank and credit card statements, household bills and insurance policies are in order, have a good look at them.

This will give you a clearer picture of your income and expenditure every month. The questions you could ask yourself are:

  • Where could savings be made?
  • Do insurance policies need to be updated and could you get a better deal by shopping around and using comparison sites?
  • Are you happy with your current account and does it suit your lifestyle or are you being hit by overdraft charges or paying for services you never use?
  • Would you prefer to keep some money in your account and be rewarded for that, or earn cashback on credit card purchases?

Think about your goals for one year, five years and 10 years – do you want to have paid off a debt or your mortgage, or simply have everything in order?

  1. Shop around for deals

 Comparison sites make it much easier to see whether you are getting a good deal on your home contents and buildings insurance, car cover, travel policy, utility services and your extras like tv and broadband packages.

Heating and lighting bills are higher at this time of year, so it really pays to switch if you are not on the most competitive deal. Just watch out for any early redemption penalties in the small print of your current deal.

“Try realign your annual review dates for car insurance, utility bills, and cable tv, so you can devote only one day a year to getting the best deals,” says independent financial adviser Yvonne Goodwin. “Keep costs down by making it your aim to switch to more competitive deals.”

 5.Set aside money for emergencies

 As a general rule of thumb, it’s a good idea to have three months’ worth of salary or outgoings set aside in a savings account for a rainy day. You can build up this fund gradually by setting up a direct debt from your current account which saves small amounts on a regular basis.

Over the long term this can really add up, and means you are covered against any emergencies. Regular savings accounts pay good rates of interest but do require you to commit to 12 months’ worth of saving.

Don’t forget: If your employer offers a pension scheme, especially one that they pay into for you then join it.  If you don’t, it’s like throwing salary away.

 

  1. Start to pay off your debt

With interest rates on savings so low, you will pay more interest on your debt than you receive on any savings. So, it makes sense to clear your debt as quickly as possible.

Could you get a better deal on your credit card? It may be that you are able to transfer your debt to a balance transfer card, which will cut your costs. Just make sure you have a plan to pay off the money in the long term. Watch out for the transfer fee and do your maths so that you know whether the savings are worth it.

If you are only making the minimum payments each month, could you increase them, even by just £10? That will make a difference over time.

 Enjoy your new money confidence

Simonne Gnessen says: “When you take control of your money it can give you a massive confidence boost, which feeds through to other areas as well. You are reinforcing a message to yourself that you are able to achieve these things, and that is very powerful.”

Happy piggy bank

 

 

 

 

 

A shorter version of this article appeared in Reader’s Digest Money

How to spot the signs of problem debt

Snowdrops

January is the month of resolutions and recovery – and the time when the credit card bills make an unwelcome landing on the door mat.

Depending on which credit card you have chosen, you may have an interest-free period which will give you an opportunity to start paying off your December spending. If, however, you are starting to worry about how you are going to meet essential payments like utility bills or the rent or mortgage, or you have an overdraft which is accruing interest and you don’t know how you are going to be able to clear it, then it is time to seek professional help.

Ways to find support

 For anyone who finds themselves facing debt, the support of people close to them can be invaluable. The Money Advice Service (MAS), a government body set up to provide free and impartial money advice, is calling on friends and family to be alert to signs that loved ones might be experiencing problem debts.

MAS says it can take a year or more before people recognise that their money issues are becoming unmanageable. So, if you are still struggling with debt from Christmas 2016, you are not alone. The advice from debt charities, who offer their counselling services free to anyone who needs it, is that the sooner you come for help, the quicker things can be sorted out.

Signs to watch out for

According to the Money Advice Service the signs that a friend or family member might be facing problem debt could include:

  • A debt in the past
  • A recent life event – an event that has resulted in a loss of income or higher spending for example having a baby, being made redundant, illness, divorce or a death in the family.
  • Over spending – they always seem to have the latest ‘must have’ items although they don’t have the income to cover this.
  • Anxious, withdrawn or depressed – they have reduced time socialising, and/or they are avoiding friends.
  • More secretive – starting to hide issues and avoiding talking about finances
  • Changed their spending habits – either reducing spending (going on fewer holidays or eating out less) or overspending (spending without a plan for repayment for example putting luxury items on credit)
  • Tired or are having trouble sleeping
  • Weight has changed suddenly – either increasing or decreasing

 Jane Tully, Director of External Affairs at the Money Advice Trust, the charity that runs National Debtline, which offers free debt counselling, says if you have debts that you’re going to struggle to pay it’s important to seek help early.

“It helps to make a list of all your debts and see if you can claim on any insurance, such as mortgage payment protection insurance, if you have it,” she says. “Once you have identified your debts, you can contact your creditors to explain the situation, or seek free debt advice from a debt advice charity who can take you through your budget, look at which priority and non-priority debts you might have and the options available to you.”

Get help early

 The Money Advice Service’s own research suggests that 10% of the population could be suffering in silence with serious money problems. Even though they may feel under financial pressure, it can take time for people to realise that they need to take action. MAS says being able to recognise the signs of problem or persistent debt, and getting help early, will prevent these issues becoming critical.

“We know from our research that the journey into problem debt can last a year or longer,” says Caroline Hamilton, debt expert at MAS says.

She says it can be hard to spot that in yourself or others but some of the signs are:

  • missing payments
  • feeling overwhelmed by debt
  • using credit to pay for the everyday essentials
  • worrying about how you are going to make it to next month

You may also have sleepless nights worrying about money, and your relationship may start to suffer. If you live with someone who has problem debt you may notice some of the signs and could encourage them to take action, particularly if they are becoming withdrawn, losing sleep, or losing or gaining weight suddenly.

It’s never too late to seek help

She says that it is “never too early or to late to seek advice” and for someone who is not in debt or not having a problem with debt but who would like some helpful money advice, they can have a chat with a counsellor from the Money Advice Service. “If you go for help earlier then you can avoid a money crisis and open yourself up to a range of options which someone in debt crisis might not have,” she says.

The signs someone is experiencing problem debt are often difficult to spot. They may be hidden due to embarrassment, to protect friends and family from the situation or because they ether don’t realise or want to confront the full extent of the problem. Signs will vary for each person. However, there are a range of physical, emotional and behavioural symptoms which can give friends and family subtle clues about behaviour which seems out of character.

“When people start to worry about debt they might be concerned about how much they are spending and so start declining social invitations, or the nature of their food shop changes,” she says.

More information

The Money Advice Service is free and you can talk through issues in confidence with a counsellor. They can give advice or suggest where you can go for more specialist debt advice. The number to call is 0800 138 7777.

National Debtline offers free debt advice, phone help and webchats:

Business Debtline offers free debt advice

StepChange Debt Charity has Debt Remedy – a free debt advice service

Citizens Advice offers free help with debt problems: https://www.citizensadvice.org.uk/debt-and-money/

A shorter version of this article first appeared in Reader’s Digest Money