Five ways to spring clean your finances

It’s the season for scrubbing your finances – here’s what you need to know

Knowing where every penny goes and how those pennies are being spent is crucial against whatever economic turbulence comes creeping over the horizon (Getty)

You’ve filed your tax return, completed the Census and there won’t be a new episode of Line of Duty for days.

But a deep clean of your financial affairs isn’t just about filling time until life reopens for real, or creating jobs for the sake of them.

It’s not even about welcoming the season of renewal and optimism with a good clear out.

This year, more than ever, knowing where every penny goes and that those pennies are being spent or saved in the best way possible could be crucial in the fight against whatever economic turbulence is coming creeping over the horizon as the last of the big emergency bolsters roll away and the true impact of Covid, Brexit and the rest reveals itself.

Usually, this kind of list includes ways to bolster income as well as cutting costs. But with the jobs market in a weird place, any savings we had diligently set aside shrinking fast and millions relying on emergency cash thanks to things like illness and redundancy, it’s all about cutting out unnecessary costs this spring.

1.     What have you got?

“There are lots of easy ways to cut your costs – even if it’s a small amount here and there, it all adds up. The money you save, however small, could be redirected into your pension or a savings account to plan for your future,” suggests Al Ward, head of customer savings at Standard Life.

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• Shoppers warned not to go on huge shopping spree when lockdown ends

Start with a cold, hard look at your budget – your income versus outgoings. “If you have memberships and subscriptions, or other direct debits you never use or could live without, consider cancelling them. It is surprising how much money you can save over time from monthly payments like these,” says Ward.

Better still, go through all your regular payments looking for low hanging fruit. Expensive utilities and insurance policies could be requoted or renegotiated to trim down some spending, especially if you’ve fallen foul of a contract renewal that can still end up costing you more as a loyal customer than a new client would be charged.

Data from GoCompare suggest 7.6 million motorists have already auto-renewed their car insurance this year, costing an extra £2.1bn.

Meanwhile, research by Shawbrook Bank has found that three-quarters of those who had saved since the first lockdown in March 2020 were planning to spend the money in 2021, with the most popular intended outlays including holidays and home improvements. These costs will need to be factored into your spending, so if you haven’t created a budget, now is the perfect time.

2. Check your entitlements

Year after year the government releases its statistics on benefits payments and entitlements. And year after year, the figures show many billions of pounds are going unclaimed.

In 2018-19, the latest figures available, a million people failed to claim pension credits – around four in every ten people entitled to the money. That’s the equivalent of £1.8bn or £1,700 a year per household.

At the same time, 1.1 million families didn’t claim the housing benefit they were entitled to. Underpaid by £3.4bn, those claims would have been worth around £3,100 per family a year.

Check if you are receiving, or if you are eligible for any benefits through your employer too. It might be cheaper than purchasing individually and may even mean you can stop paying for something separately, such as life assurance, suggests Ward.

3. Switch

“Energy costs make up a big chunk of most households’ monthly bills, so it’s important to try and get the best deal,” says Paul Went, consumer managing director at Shawbrook Bank. “It is thought the typical customer will see their gas and electricity bill rise by £96 to £1,138 a year due to Ofgem’s recent increase in the energy price cap.”

With many of us working from home, broadband is extremely important – not just the price that’s important, but also the speed and reliability of the service. “Now is a really good time to check your package and find out how much you might be able to save by switching if you’ve completed the required minimum term,” he adds.

4. Keep score

Actively managing and improving your credit score could mean you’re more likely to be accepted or offered better rates for credit. Lenders will use this information along with other checks to decide if you’re eligible for the line of credit you’re applying for.

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• How to invest your pandemic pounds in an ISA

Several companies offer free credit reports including Equifax, Experian, and TransUnion, Went adds. But they use different formulas and different data which means your score may not be the same across all of them.

5. Get advice

“Many people find financial decisions and financial planning quite tricky and often put it off. Although there’s likely to be a cost, a conversation with a financial adviser could give you good ideas about where to start,” suggests Ward.

“A financial planner can help you with everything from your current savings plan to your retirement. There is often a misconception that you should only get financial advice once you reach a certain age but getting professional advice early could help you save more for your future in the long term.”