Spring clean your finances
A new year is always paved with good intentions; eat healthily, take-up jogging, cut-down on alcohol. Assessing your financial health should also be part of this personal MOT.
Money experts will tell you that the poor grasp people have of their financial outgoings and income is often quite breathtaking. Although it may seem overly basic, making a conscious effort to note down your daily transactions over a month is one of the fundamental means of assessing your financial health. Divide your expenditures into subcategories, for example, food bills, household utilities, rent or mortgage payments. It may be tiresome, but micro managing daily monies is a sure-fire way to improve your finances.
The next step is to use this data to compare money-in versus money-out. Don’t be surprised if you find that your expenditure outstrips your income; this is a common occurrence. If this is you, remain calm and simply use the information to analyse where you are haemorrhaging cash and draw up an achievable spending allowance. Making several minor spending adjustments, for example, packed lunches not shop bought and sticking to a weekly shopping list to reduce wastage, will quickly have a constructive effect on your bank balance.
Next take a look at your bigger financial obligations. This could be mortgage repayments, credit card loans, store cards or overdraft fees. Prioritise these so that those carrying a high APR are paid off first, as these will be the most expensive in the long run. Check you have the best mortgage deal for your circumstances and whether it can be re-negotiated. Use any spare money to pay off outstanding liabilities where possible.
Part of assessing your financial health should also include ensuring that both your future, and that of any dependents, is secure. Although retirement may seem a long time off, it is never too early to start a pension plan. We all want to make sure our family is protected; therefore you may wish to consider a life insurance policy but, above all, keep an up-to-date will. A little forward planning is always a good idea: consider whether your finances would be able to cope with an unexpected expenditure or an increase in utility bills. In the current employment market it is also worth thinking of where you could make cutbacks if you were unlucky enough to be made redundant. This will be far less stressful if you already have an idea of how you could cope financially in leaner circumstances.
Resolutions to take up jogging or go on a diet may come and go but don’t let giving your finances an MOT fall by the wayside. Make use of the wealth of information available online to help you organise your finances this year.
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