Get your finances in shape for 2021
There’s never a time like the present to review your finances by making sure your money’s working its hardest for you, and none of it is going to waste.
So, what’s likely to be involved – and what are some of the most common issues in danger of compromising your finances?
Personal banking has become more and more convenient over the years – especially now that so much of it is conducted online. Being able to meet recurring payments by automatic direct debit has also taken the chore out of keeping up with regular subscriptions.
But is your current account in danger of becoming awash with direct debits for one thing and another? Are you certain you are keeping tabs on every payment that is made this way regularly? Especially if the original mandate was made several years’ ago, it is easy to overlook some that you no longer use.
Although easy to set up, this type of automated payment may prove more difficult to manage – that’s why a correspondent in the Evening Standard newspaper on the 12th of August 2020 called them “pain-free direct debits”. So, make sure you’re not feeling the pain of payments you no longer need to make.
Are you paying for an unused gym membership, for example? Or an online magazine subscription that you no longer require? Go through your direct debits with a fine toothcomb and check that you are only paying for what you need.
Leading on from this, some of those direct debits might be for the premiums on recurring insurance policies. So, now is the time to check that all of those policies are still needed and, if they are, of course, that they remain valid.
It’s not just a question of whether you are still paying for insurance on a mobile phone you ditched ages ago but a case of reviewing everything from your motor insurance to home insurance, pet insurance to travel insurance.
You may be paying for a standalone domestic home emergency insurance policy when you have one built into your home insurance policy. Check and double-check what your insurance policies’ cover.
For many families, probably the greatest single monthly expense is the mortgage repayment.
Given the size of the slice of your household budget that the mortgage is likely to consume, therefore, it is essential that you are paying no more than necessary and that your current mortgage deal suits your present financial circumstances.
A careful review might reveal a need to switch mortgage deals or even remortgage. Do take note, however, that lenders are likely to be looking more carefully at any mortgage application. So, more stringent checks on the stability of your home finances, questions relating to your employment status, and maybe even the request for a letter from your employer to confirm that your job and position is safe for the foreseeable future.
Check that you are still getting the most cost-effective and appropriate utility packages (e.g., gas, electricity, broadband and mobile ‘phones). Several online comparison websites allow you to check whether you may be able to get more attractive deals by switching providers.
If you do decide to switch to another provider, make sure you are aware of any exit fees on your current package and factor them in to any overall cost savings.
Savings and debt
With the Bank of England base rate currently so low, you cannot reasonably expect to earn a high rate of interest on your savings. You should do your best to secure the most advantageous rate.
If you have outstanding debts (on which you will typically be paying a higher rate of interest), you may wish to funnel some of your savings into clearing the debt (while making sure, of course, you still have some savings behind you for emergencies).
Finally, remember that your pension is probably your single most valuable investment in the future.
Carefully review your current pension arrangements, consider if and where there might be room for improvement, and start planning now for life after your chosen retirement date. If you have any concerns about your pensions, please do bring this to our attention as soon as possible.
This data is correct as at the time of writing.