Spring is in the air, and there’s no reason to restrict your spring cleaning to your wardrobe or home interiors – blow away the cobwebs on your personal finances with these simple tips – by Will Stevens

 

Everything starts with a budget

 
A Spring Budget is not just for the Chancellor, and with costs continuing to rise it’s a good time to re-evaluate your finances and whether your money is working hard enough for you. Once you know what’s coming and going, you can then decide on what you might want to cut back on or how much you might wish to save.

Through a budget setting exercise, you may also find direct debits or standing orders that you no longer use, which might bring down your outgoings further – a point of increasing focus during this period of rising living costs.

However, it is also important to make a budget realistic, so set yourself budgets for the things you enjoy in life too – whether that be dining out, clothes or holidays – this will help you stay on track for longer by making it feel like less work. Given the current cost of living increase, budgeting should also help you avoid any nasty surprises and also give you an idea of how much surplus you might have if you need to make any changes.
 

Be savvy with saving

 
Keep saving – once you have a budget in place, you should know how much you have available to put away on a regular basis. Even if you aren’t saving with a specific purpose in mind, such as buying a new home, property renovations, or the trip of a lifetime, having a nest egg is never going to be a bad thing.

Regardless of where you are in your life journey, saving and investing on a regular basis is the key to being able to live the life you want to in the future. Putting a little extra away monthly can soon stack up, especially if you are wise with where you keep it – for example, a Stocks and Shares ISA will allow you to reap long-term rewards.
 

Future-proof your finances

 
Two key focuses for financial security should be paying down debt and building a rainy-day fund. Whether it is clearing small residual balances or putting in place a larger plan to repay debt over time, this should help give you peace of mind that your liabilities are under control.

Once this has been done, or if you have no debt, build a rainy-day fund of somewhere between 3-12 months expenditure to protect you should there be an emergency by giving you some cash to rely on without needing to take out any debt.

When it comes to looking ahead to the future, think also about protecting yourself and your loved ones – financial protection in the form of insurance (whether life insurance or income protection) has historically been at low levels in the UK compared to other major economies.

Making sure you have some form of protection in place should the worst happen will give you a peace of mind that you can survive any nasty shocks – income protection is particularly poignant here as it can ensure you are not left short should you be unable to work due to accident or sickness.
 

Polish your credit score

 
There are lots of ways to improve your credit score but the big one is making sure that you meet your monthly commitments on any debt or payment plans – i.e. mortgage payments, credit cards, or even phone contracts.

Paying off your credit card monthly and keeping the usage low as a percentage of your available credit will also help. Beyond that, it is making sure your personal audit history is clear and that everything is registered to one address, importantly the one to which you are registered for electoral purposes.

Getting on top of existing debt is naturally essential for improving your credit score, and the first most important step is to identify what debt you have, what rate of interest you are paying (possibly for each type of debt), and when it will become due.

Then the key is to prioritise and pay down those with high interest rates, or the threat of higher rates or penalties if you are late. The priority should always be to pay down debt ahead of doing any investing so if you have any savings or investments, consider using these to pay down your debt if the interest rate is higher than the expected return on the existing savings.

It’s also important to consider consolidating your debt – taking out a single loan at possibly a lower interest rate so that your target of repaying it becomes clearer. Finally, don’t be afraid to seek help – there is government assistance available designed to help those in debt work their way out of it.
 
If you are unsure about any of the above or where to start, speak to a professional in the form of a Financial Planner or The Money Advice Service to get started.
 
Will Stevens is Head of Financial Planning at Killik & Co
 





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