Financial wellness: Seven tasks to improve your wealth forever
A full overhaul of your finances can be daunting and many of us find it hard to make the time. However, if you have just 20 minutes, you can improve your wealth for the rest of your life by carrying out one of these simple tasks – writes Rosie Murray-West for Selftrade
If you plan to do one a week for seven weeks, you’ll find yourself in much better shape for the future, so it’s really worth setting the timer and getting on with it.
Switch your current account
Despite the advances of technology and the introduction of a guarantee to incentivise people to move bank accounts, we’re more likely to leave our spouses than our banks.
The most recent figures from payment experts BACS show that just over a million people switched their current account last year, with numbers falling slightly from the year before.
However, the bank account you have had for decades may be sapping your wealth, as they are all structured differently, and the right one for you will depend on how you run your finances.
If your current account is always in credit, choose to switch to someone who will pay interest on that cash, such as Santander, which pays 1.5% interest on balances up to £20,000, or TSB, which pays 3% interest on balances up to £1,500.
Some accounts, including the Santander account above, come with a monthly fee, but that may be worth it if it offers cashback benefits. Others offer an interest-free period for six months, or a cash bonus for switching.
If you are often in the red, try an account with cheaper overdraft facilities. First Direct offers £250 for free, while a Nationwide FlexDirect account gives you a twelve month overdraft for free (subject to approval), which gives you time to clear it.
Spring-clean your investments
If you have held the same investments for a long time, your strategy might need an overhaul.
Take 20 minutes to look at the performance of your investments over the last year (or more if you haven’t updated them in a while) and check that you are happy with their performance.
If you hold funds, you can check their performance against benchmark indices using a fund factsheet available from any investment platform, or using a financial information service such as Morningstar.
While past performance is not necessarily a guide to future gains or losses, you can then consider the cost and benefit of possible alternatives, unless you are happy with the reason behind any underperformance.
Because not all assets and investments appreciate or depreciate equally, if you do not spring-clean your investments regularly, you might find out that your portfolio is out of balance.
Experts suggest that you hold a portfolio that is diversified across different business sectors as well as different types of assets (for example bonds, cash, shares and property).
If one part of your investment portfolio has performed particularly well or badly over recent years, you might find that your wealth is heavily exposed to one area, leaving you vulnerable to sudden changes. A quick review of your assets can help you to put the balance back.
Prune your bank statement
Whether it is gym memberships that you don’t use, apps that you don’t play, or subscriptions to magazines that you do not read anymore, figures from GoCompare.com suggest that the average Briton could save £360 per year simply by cancelling the standing orders, direct debits, subscriptions and donations that they do not need anymore.
The quickest way to spot these ‘money leaks’ is to go through your bank statement, noting any payments you do not recognise, and getting rid of them if necessary.
Direct debits are easy to cancel – you can do those yourself online or on the telephone. It is slightly more difficult to spot and cancel a continuous payment authority, which is a type of payment that has been set up by a company, with your permission to take payment when needed.
You might not even realise you have given permission. The best way to spot them is to look for payments you don’t remember making, especially if they occur regularly, for example monthly, bimonthly, or annually.
Once you spot them, you can now ask your card provider to cancel them, though it is a good idea to write to the company itself to ask them to cancel too.
Set up or switch an ISA
Paying tax on any gains on your investments, on cash interest or on peer-to-peer lending gains can sap your returns. The annual amount you can put into an ISA, which allows you to save or invest tax efficiently has risen to £20,000 a year from April 2017.
Once you have money in an ISA, you can switch it from cash to investment without it losing its tax free status, so there’s no excuse for leaving money to languish in accounts paying a low rate of interest. If you are looking to compare Cash ISAs, you can use www.moneyfacts.co.uk to look for the best rates, while investment platforms including Selftrade all have details of how to switch your ISA and the investments or cash within it.
Switch your utility providers
This is several 20-minute tasks in one, so try to stick to one at a time. The price we pay for electricity, gas, broadband and telecoms can vary wildly, and the more loyal you have been, the more you are likely to be paying.
In 20 minutes you can switch from your existing gas and electricity tariff, either choosing a new provider or simply dealing with your existing one. For the simplest method, just ring your current provider and ask them to put you on the cheapest possible tariff.
If you want to save even more, a comparison site such as Uswitch.com or GoCompare.com will allow you to input details of your own usage and then give the best rate for you. Finally, go through a website such as Quidco.com or Topcashback.co.uk to see if you can get a cash bonus for switching to a new provider as well.
With your broadband, the process is similar. Broadbandchoices.co.uk or moneysupermarket.com will allow you look at options, whether you are hoping to change your television package and landline phone as well, or are looking for a standalone product. Always check the customer satisfaction score as well as the savings to prevent frustration.
Download a budgeting app
Whether there is always too much month left at the end of the money, or whether you want to ensure you can put more away into your savings and investments, there are now easy ways to keep track of where your cash is going.
Try downloading OnTrees, Wally or Moneydashboard to take control of your money now. These apps allow you to see your incomings and outgoings at a glance, so that you can make adjustments to your spending accordingly.
For a more active app try YNAB, or You Need A Budget. This software, which works on a computer with an app alongside, allows you to allocate all of your money into specific pots, accounting for every pound. YNAB is American, but gives you the option to work in pounds. You can get a 34 day free trial of the software, but after that it costs $50, currently nearly £41.
Set up a direct debit into an investment account
If you want to invest for the future, you do not need to wait until you have a large lump sum to get started. Instead, set up a direct debit into an investment account, such as an ISA, and get started.
Selftrade allows you to invest from as little as £10 per month into one investment. Even if you start small, you can keep increasing the direct debit in future, building up a long term fund without even missing the cash.
Selftrade is a DIY investing platform designed for individuals. It gives you access to global markets, control over your investments and offers customers award-winning support.