5 tips to help you spring clean your finances
As we all enjoy brighter weather and longer days, it’s probably safe to say that spring is here. Traditionally, the season is seen as a moment for growth and new beginnings, so it may well be the case that you’re looking to make some life changes.
When it comes to your money, it’s a great time of the year to undertake a little bit of a tidy up to make sure that you’re heading in the right direction. To get started, here are five tips to spring clean your finances.
Review where you’re at financially
Begin your spring clean by taking stock of where you are financially. You’ll need to get a clear picture of where your money is going before you can take any steps to get back on track. The easiest way to do this is to get hold of your last few months of bills or log onto your banking app, which should give you the best overview of what’s going on.
Now you can see the bigger picture, you can identify any areas that need attention. For instance, are you paying too much for anything each month? Are you prioritising debts over any further spending? Are your savings on track to meet your goals? Sit down and create a plan that addresses any weaknesses in your finances.
Look for any unnecessary expenses or Direct Debits
Trying to build your finances when you’re spending or paying out Direct Debits for items or services you don’t use is like attempting to fill a bath that has holes in it. By fixing the leaks in your bank account, you’ll find you have more money to utilise each month.
While you’re reviewing your bills, look for any regular, non-essential payments for things you don’t use or have forgotten about. Do you make use of all those streaming services you’re subscribed to? Are you getting your money’s worth from your gym and health club membership? Does that food delivery service offer more value than going shopping yourself? There are often many overlooked expenses you could safely cut each month.
It may also be worth looking at your monthly bills to see if you can reduce any of your essential spending. For example, you could switch to a cheaper supermarket, avoid car journeys that are within walking distance or see if your phone bill could be cheaper via another provider. A little saving can often add up over the long run.
Prioritise any expensive debts
First and foremost, it’s vital to remember that you always need to meet your obligations when it comes to repaying debt. However, if you find that you have enough money in your budget to decide whether to make additional repayments or put some away into your savings, the answer isn’t always as straightforward.
The key comparison to make in this situation is how much your debt will cost in interest against how much interest you could earn from your savings. If you have debts that will cost you more than you could earn, it’s worth prioritising paying these back before you put money into your account. Expensive debts, such as credit cards, store cards and overdrafts, are often worth paying off sooner when considering the bigger picture.
That being said, some debts, like personal loans or mortgages, have fixed amounts that you will pay every month. This means that, once you’ve budgeted for them, any excess money could be paid into your savings, where they can help you achieve your goal or go towards building an emergency fund.
Improve your credit
As part of your spring clean, it’s worth thinking about the status of your credit history, especially if you’re planning to apply for a product like a mortgage or a loan that will take your recent record into consideration.
If you haven’t already, it could be worthwhile getting a report from the likes of Experian or Equifax, both of which are leaders in the market in the UK. This can help you get an idea of where you currently stand. Moving forward, it’s worth being aware of the factors that can negatively impact your credit, as well as improving your record by maintaining timely payments on debt, keeping utilisation low and ensuring you’re on the electoral roll (read this article from Experian for more advice on improving your credit).
Planning on applying for a mortgage but don’t have a strong credit history? While you may not have a lot of luck with traditional lenders, there are still options available. For instance, at Atom bank, our Near Prime mortgages are designed to help those who have one or two blemishes on their record or are on the path to recovery from bad credit.
Review your savings account
A big part of any financial spring clean is to go over your savings and make sure they are in the right place or heading in the right direction for your future plans. Whether you’ve already built up a decent rainy day fund or are just starting out, there are things worth thinking about in your springtime tune-up.
Should you already have some money put away, consider whether it is in the best place to benefit you. For example, have you chosen an account that will put your money to work with a decent interest rate to help counter the rising cost of living? A fixed-rate savings account, like our Fixed Saver, allows you to access a typically higher rate of interest as long as you can lock your funds away for an agreed length of time. If you don’t need access to your cash for the foreseeable future, it could be a good option.
On the other hand, if you’re starting on your savings journey, you may be looking for an option that allows you to earn interest while still giving you access to your money if you find yourself in a pinch. An instant access account, like our Instant Saver, will do just this, allowing you to build up savings freely and at your own pace.