WITH the new tax year under way and winter behind us, it’s time for spring cleaning – and not just around the house.
Taking an hour or two to review your finances can reap often surprising dividends, whether from identifying money wastage, spotting new ways to boost your income or improving the arrangements you already have in place. Paul Lothian, director at Verus Financial Planning in Dundee, offers his top tips on tidying your financial affairs
It’s quite a daunting prospect to change suppliers of our gas, electricity, broadband or phone. However, help is at hand in the form of comparison sites such as www.uswitch.com and www.energyhelpline.com. Before switching, contact your current provider to tell them you are leaving – they may well try to retain your custom by sweetening their terms.
Do you know how much you spend and on what? Most people would be surprised (and even shocked) if they took the time to note down in detail exactly what they have coming in and where the money goes. Once you’ve done this, you can identify areas for improvement and changes. Bank and credit card statements are a good starting-place for this exercise.
You can contribute up to £5,760 to cash individual savings accounts (Isas) in the new tax year. Those with sufficient capital or surplus income should try and maximise their available tax-free Isa allowances. If you have already built up cash Isa funds, make sure you are getting a competitive rate of interest to maximise the tax benefit. Cash Isas can easily be transferred, so don’t let your loyalty to your bank or building society (or your inertia, which these institutions exploit) cost you money. See comparison sites such as www.moneysupermarket.com and www.moneyfacts.co.uk for the best rates.
Stocks and shares Isa
The annual limit for stocks and shares Isas is £11,520 in the 2013/14 tax year, minus the amount you put into a cash Isa. Long-term investments should be made as tax-efficient as possible and this means maximising the use of stocks and shares Isa allowances. For those with sufficient capital/income, financial advisers generally advocate foregoing any cash Isa subscriptions in favour of maximising allocation towards the stocks and shares Isa component. This is because the potential returns (and therefore the tax savings) are greater in stocks and shares. Cash Isas can be converted/transferred into stocks and shares Isas, but not visa-versa.
Have you reviewed the level of your retirement savings lately? Do you know whether they will be sufficient to meet your retirement objectives? Check out the calculator at www.moneyadviceservice.org.uk/yourmoney/interactive/pension_calculator.aspx
Also, where are your pension funds invested? Is your money languishing in a poor-performing managed or with profits fund? Look into the investment options under your plan. Find out what you are paying in charges.
If you are not locked in to your current mortgage deal by redemption penalties, see how much you could save by re-mortgaging. Those whose mortgages are less than 80 per cent of their property’s value are most likely to be able to make savings. Many lenders offer remortgage products with no fees. Consider overpaying on your mortgage in order to repay the loan ahead of schedule. Overpayments can generally be taken back as payment holidays in the future if necessary.
Is your current level of protection adequate? Are you receiving good value for money from your current policies? www.invidion.co.uk/life_insurance_calculator.php will help you answer the first of these questions and www.confused.com/life-insurance will help with the latter. Remember, don’t cancel any existing policies until the new cover is in force.
If you have credit card or overdraft balances, make sure you are not paying more in interest and other charges than is necessary.
Average personal loan interest rates have risen sharply since the credit crunch, so it may be difficult for all but those with the best credit scores to effect any savings on unsecured borrowings.
Zero per cent interest deals on credit card balance transfers remain available, although they tend to come with an initial fee typically up to 3 per cent of the transferred amount.
Do you have an investment strategy, or are your investments a hotch-potch of seemingly random shares, funds and products?
Do you understand what risks your capital is exposed to or how your funds have performed relative to the market/ their peers? www.morningstar.co.uk offers an independent fund rating service and also maintains fund performance statistics.
Car and home insurance
Despite almost universally rising premiums, this remains a fiercely competitive market. Significant savings can be made by handing your motor and household insurances to a single provider. Don’t wait until your renewal date looms (when time pressures may mean that you don’t manage to shop around effectively). Visit one of the many comparison sites now to get an indicative quote. You can then save your details to enable a re-quote when the renewal dates comes around. There are significant differences in cover offered, so make sure you are comparing like with like.