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Spring clean your finances
You should start your financial spring clean by working out where you stand financially. Get out your financial paperwork and try to answer these three questions:
How much money do you have?
How much debt do you have?
Are you spending more than you earn?
The first two questions may not take too long to answer – it depends on how much paperwork you have. The third question could take longer. Especially if you’re someone who doesn’t keep an accurate record of your spending
If you haven’t been keeping a record, don’t worry, just make a big effort to start now. Try to note all your spending for the next month, right down to a Mars bar. Then in a month’s time, you’ll be able to see where your money is going and hopefully you’ll be able to see some areas where you could cut back.
If you don’t have a spending record right now, don’t worry. You can still get cracking on your financial spring clean today.
Debt
Let’s start with the painful, but very important subject of debt.
If you have any debt beyond a mortgage, perhaps a loan or some credit card debt, you should try to focus on paying off this debt as quickly as possible.
It’s also really important that you pay as low an interest rate on your debt as possible. If you’re paying a low interest rate, a greater proportion of your debt repayments will go to actually paying down your debt rather than on interest payments.
So try to convert high-interest debts into low-interest debts if you can.
The cheapest way to borrow is via a 0% balance transfer credit card. At the moment, the market-leading cards are the Barclaycard 31-Month Platinum Visa card and the Halifax 30-Month Balance Transfer MasterCard.
Transfer a credit card debt to the Barclaycard and you won’t have to pay any interest on the debt for 31 months! Your only cost will be a fee of 2.99% of the amount you're transferring. The Halifax card is slightly more expensive with a 3% fee and you have one month less to pay off your debts.
Sadly these cards aren’t available to everyone – you need a good credit rating to get hold of them. If your credit rating isn't great, maybe because of missed payments in the past, the Capital One Balance card offers 0% on balance transfers until October for a 3% fee. However, this card has a very high representative APR of 34.9%, so if you don't pay off your balance in full by the time the 0% period ends you'll be hit by expensive cards.
There are also a few 0% cards where you can transfer money into your bank account to pay off an overdraft – known as a money transfer. The MBNA Platinum Visa and the Virgin Money MasterCard both offer interest-free periods of 29 months with just a handling fee of 4% of the amount you want to transfer to your bank to pay.
With all of these credit cards, it's crucial you pay at least the minimum payment each month or your 0% offer will be withdrawn.
Moving onto mortgage debt, you’re probably paying a pretty low interest rate on your mortgage at the moment, but you may not be paying the lowest possible rate – especially if the ‘introductory deal’ on your mortgage has expired. There’s no harm in seeing if you could get a lower rate than what you’re paying.
Finally, if you’re really struggling to pay off your debts, you could get free advice from one of the debt charities such as StepChange or National Debtline. You may find that your debt situation isn’t quite as bad as you thought.
Cut your spending
Cutting your spending makes sense for most of us. Even if you’re already spending less than you earn, some spending cuts could boost your savings, and that’s well worth doing as life expectancy gets longer and longer.
Make sure that you’re getting the best deals on all your insurances (car, home and life if you have it) as well as your gas and electricity bills. Also compare your mobile and broadband bills with what else is out there.
The easy mistake with all these bills is to sign up for an attractive new deal and then forget about when that deal expires. If you don’t keep track of where you stand with all these suppliers, you could be automatically renewed onto much less attractive tariffs a year or two down the line.
Boost your income
You could also think about whether there are any ways you could boost your income. That could mean trying to get a second job or on a smaller scale you could start using the top cashback websites such as Top Cashback or Quidco.
A cashback credit card might also help – providing you keep on top of your spending and pay off your balance in full each month.
[Compare cashback credit cards]
Use your tax breaks and credits
Make sure you’re making the most use of your tax breaks. You can now save up to £11,520 a year into a tax-free ISA. Up to half that amount can be in cash.
And make sure you're claiming any tax credits you're due. You can find out if you're eligible at the Benefits Adviser website.
Budgeting
This is probably the most important point of the article. Once you’ve got a spending record, you can draw up a budget for your future spending. Set tough but realistic targets and make sure you’re spending less than you earn.
Check every day to see if your spending isn’t going over your target.
If you understand your whole financial situation, you may find that you have a bigger incentive to stick to the targets in your budget.
Good luck!
