Getting organised with anything is a task most people like to put off. These delaying tactics also apply to people’s finances. However, there is no time like this moment to start getting decluttered and get your finances organised.
So, to help give you a head start on the road to decluttered finances, here are four handy steps.
1. Create Separate Bank Accounts
Having all your physical paperwork mixed doesn’t make sense to most people. But when it comes to money, everything generally gets stuffed into a single bank account.
Just as you might create separate files for the various pieces of paperwork you collect, having different bank accounts will give you greater visibility and control over your finances. Consider setting up other accounts for bills, expenses, savings, and so on. This level of organisation means you’re unlikely to misspend money you have allocated for savings, or blow your housekeeping money on some new shoes!
It is certainly more efficient to put any money you’ve allocated for long-term spending into an ISA or other savings vehicle. At least here, it will earn you some interest, and it can remain out of temptation’s reach.
Online banking makes it simple to set up multiple accounts. Moreover, you can move money between accounts with a few clicks of the mouse.
2. Conduct Regular Reviews of Your Bills and Direct Debits
Knowing what you’re spending your money on and minimising that spending is essential to having organised finances. Using a mobile banking application allows you to see what direct debits and standing orders you have going out each month.
Many people take out online subscriptions that they stop using but continue to pay. Others allow broadband, phone, or TV contracts to roll on regardless of price rises.
Regularly reviewing your automated spending can reduce the shock of discovering these price hikes after many months. More importantly, doing so will put money back into your pocket.
Go through each item of spending and decide whether you are getting value for money or continue needing the service. Include the items mentioned above and look at spending on other things that are coming up for renewal, such as insurance policies and utility suppliers.
There are plenty of opportunities to save a lot of cash by switching suppliers or searching for better deals. Most companies offer enticing deals to new customers, so shop around.
To ensure there’s enough money in your account to pay your bills, set up your banking so that they get paid after your wages have arrived in your bank account. Doing this will mean you avoid any late payment penalties or unfavourable credit ratings.
3. Eliminate Your Debt
Debt is not only costly in terms of finance, but it comes with a high emotional price too. Eliminating your debt should be your top priority, and you will feel great when you have done so.
Of course, eliminating your debt means adjusting your spending habits and making some sacrifices, which can be challenging. However, rather than focusing on the things you will miss out on in the short term, concentrate on how your life will be when you are free of debt.
Knowing where to start to clear your debt can also be challenging, particularly if you have multiple debts. This situation is where compiling a debt hit-list comes in handy.
List your debts in order of the size of interest rate rather than the most considerable amount of debt. Clearing those you are paying the most interest on means you will have more money available to remove the capital on the remaining debts.
As we mentioned earlier, debt comes with an emotional cost as well as a financial one. If you find you are struggling with debt, you might want to consider debt counselling to get some support.
4. Treat Your Future Self
Organising your finances will have some immediate benefits. It will also serve your future self well. It might be challenging to picture what your retirement will look like if it is still many decades away. However, consider your future self and plan for your retirement as soon as possible. Doing so will ensure you have the best chance of a comfortable post-working life.
Where To Start Organising For Retirement?
The good news about planning for your retirement is that you may well have already started. If you are over twenty-two and employed, you will automatically be enrolled in a workplace pension scheme. As of April 2019, workers pay 5% of their gross salary into the pension pot, free of income tax. This amount is topped up by 3% from your employer, meaning that 8% of your salary’s value gets added to your retirement fund.
The State Pension
Currently, the age at which you receive the state pension is 65 years for both men and women, but this age is likely to rise. If you are not enrolled in a workplace pension or have no other private pension plans, you should seriously consider whether the state pension alone is sufficient for your retirement.