Is it time to spring clean your finances?
We’re beginning to look forward to a better summer with positive news about the lower virus levels and with lockdown lifting due any time. The arrival of spring is perhaps a good time to review our finances whilst we are still spending most of our time at home.
Here a few things to think about.
Home schooling, working from home and extended central heating hours have all contributed to energy bills being higher than we’re used to. Smart meters apart it’s not too difficult to find a supplier that could offer a cheaper deal, especially if you’re prepared to manage your account online and take a dual fuel tariff. Using comparison websites are the best way to find a better deal but just be careful to compare the quotations with your current costs, the savings quoted don’t always represent a saving on what you’re paying now.
Your rainy day savings
How much access do you really need to your savings? If you want it easily accessible you have to accept that its interest rate will be negligible and well below the rate of inflation. You might think about fixed rate savings from a bank or building society; you won’t earn much more interest than you would in an easy access account but there is no risk to your capital. If you’re prepared to take some risk you could consider an investment that offers the growth potential of a mix of investment assets, such as government and company bonds, stocks and shares and property funds. Depending on your attitude to the amount of risk you are prepared to take and the period of time you are prepared to commit your investment will determine what type of investment will be the most suitable. Friendly Societies and mutual insurance companies tend to be at the lower end of the risk scale with direct stock market investments at the upper end. If you have a financial adviser it is well worth talking to them about it.
Too many people automatically renew their car insurance. The insurance company automatically renews your policy and collects the premium. According to one recent study it is claimed that over 4 million people get caught out this way. Whilst very convenient, spending only a few minutes searching the market when you get your renewal notice could save you quite a tidy sum.
Direct debits and standing orders
How often do you check whether these should all continue? Sometimes you will still want to keep them, for instance gym fees and cinema subscriptions, but have they been paused during lockdown? If not contact the company, they should help.
Make the most of your ISA allowances
The tax free ISA allowance is £20,000 for adults and £9,000 for children. It’s a good idea to use as much of this as you can afford. If you haven’t arranged an ISA yet, you can get cash ISAs from banks and building societies or stocks and shares ISAs from friendly societies, insurance companies and investment managers. If you want easy access to your ISA, one with a bank or building society may be the best option. If you want to invest for the medium to long term and looking for your ISA to benefit from the growth potential of an investment in a wider range of investment assets you might want to think about a stocks and shares ISA. Those offered by friendly societies are usually a low to medium risk option, those with a higher risk profile are usually available from stockbrokers or investment managers.
Don’t forget that if you’re saving in a Junior ISA for children no money can be withdrawn until the child reaches 18, but you can transfer a Junior ISA to another provider if you are not satisfied with your existing one.
Write a will or check your existing one
A will is the only way to make sure your money, property, possessions and investments go to the people and causes you care about.
For complete peace of mind every adult, whatever their circumstances, should have a properly prepared will.
If you and your partner aren’t married or in a civil partnership your partner won’t have a right to inherit if you don’t have a will.
Plan ahead with a Lasting Power of Attorney
Making a lasting power of attorney (LPA) is one of the most straightforward and helpful things you can do to protect yourself and your family. It is a way of giving someone you trust, your attorney, the legal authority to make decisions on your behalf if you lose the mental capacity to do so in the future, or if you no longer want to make decisions for yourself.
If you are married or in a civil partnership, you may have assumed that your spouse would automatically be able to deal with your bank account and pensions, and make decisions about your healthcare, if you lose the ability to do so. This is not the case, without an LPA, they won’t have the authority.
Consolidate your ISAs with a simple transfer service
You may well have opened Individual Savings Accounts, or ISAs, with several providers over the years, but do you know what is going on with each of them?
Healthy Investment’s Ethical ISA aims to outperform Cash ISA returns over the long term and to avoid the daily ups and downs generally associated with unit-linked investments.
If you find keeping a tab on your different ISAs challenging, you could consider whether consolidating them into fewer accounts might make life easier.
Are you happy with your current account and credit card?
There are plenty of current account options now available. No longer does everyone have to bank with the big four. New ones, sometimes referred to as challenger banks will often offer cash incentives to attract new customers. These days transferring current accounts is very simple as nearly all banks have signed up to offer an easy to use transfer service.
You might also want to check that your credit cards are still as useful as they should be. It depends on their features and whether they match what you use it for. As an example a 0% balance transfer card is good it you’re progressively paying off debt, but not so good if you are using it as a payment card. To avoid paying more interest than you should it’s worth making sure you’re using the right card for the right reasons.
If you have a fixed rate mortgage deal that’s coming to an end it could be worth looking around to see if you can get a better deal than your present lender is offering. You might also challenge your existing lender to improve on their offer; they don’t like to lose your business as it costs them a lot to replace it.
You might have quite an amount of savings earning very little interest. If you think you have enough saved to meet all your requirements you could think about paying off some of your mortgage. It will almost certainly save you money.
Child Trust Fund
If your children were allocated child trust funds under the government scheme have you been adding money to it? CTFs are very tax efficient and even small additions can build up a sizeable amount by the time your child reaches 18. If your child was born between 1 September 2002 and 3 January 2011 they will have been allocated a CTF. If you have no information about your’s the HMRC website has a CTF finder service.
All this information represents the personal views of the writer and should not be assumed to represent financial advice or the views of Healthy Investment.
Healthy Investment is one of the oldest financial mutuals in the UK. It was founded as a friendly society in 1835 and today provides ISAs, Investment Bonds, Junior ISAs, Child Trust Funds and savings plans to more than 110,000 members.
The society invests members’ money in an ethical With-profits Fund which “smooths” returns, holding back a proportion of gains in years of strong investment performance and using these to minimise the volatility experienced by investors during periods of falling or less buoyant markets.
Its products are available direct to the public and also via independent financial advisers.