Extend the new mania for decluttering to your personal finances and reap the benefit, says Jenny Ross
Tidying is the new black. Who’d have thought that the prosaic task of keeping your house in order could generate such a buzz in 2019?
Instagram star Sophie Hinchcliffe, aka Mrs Hinch, has garnered nearly two million followers by sharing cleaning tips and photos of her spotless Essex home. And “expert declutterer” Marie Kondo – author of the 2014 bestseller The Life-Changing Magic of Tidying – is enjoying a renaissance courtesy of her own Netflix series.
Of course, it makes perfect sense when you think about it. Our lives have become so noisy, so busy, so relentlessly hi-tech – and events in the wider world so baffling – that there is comfort to be found in focusing on the more mundane.
I can definitely vouch for the therapeutic power of weeding unloved clothes out of the wardrobe and carting them off to the charity shop.
Recently, I’ve also been tackling my library of ring binders stuffed with mini paper mountains. As part of this, I unearthed an impressive collection of bank statements dating back to my student days. I felt surprisingly nostalgic at the reminder of my questionable spending habits and the names of long-gone retailers (RIP Woolies), but reached for the shredder knowing that they are of absolutely no use to me now.
Thankfully the risk of building up future paper mountains has been mitigated by the shift to paperless statements – if you do need hard copies you can just print them via online banking. If you complete a tax return, though, bear in mind you should keep your records for at least 22 months after the end of the tax year the tax return is for.
Along with clothes and paper, Marie Kondo’s approach to decluttering (the KonMari method) focuses on three other categories of “stuff”: books, miscellaneous items (komono) and sentimental items. Deciding what to discard should be based on whether the item in question “sparks joy”.
But amassing products that don’t have a physical presence can also leave you feeling overwhelmed. Having tackled my bank statement backlog, I set my decluttering sights on the financial products themselves. Here I have to admit that my KonMari analogy reaches a dead end. I’m not sure many of us would describe our mortgage or car insurance policy as something that sparks joy.
There’s also the fact that less is not necessarily more in the case of financial products. You may have three credit cards that all serve a different purpose – perhaps one for earning rewards, one for fee-free spending abroad, and the other for paying off a balance at 0 per cent interest. But taking a hard-headed look at all the products you hold will help you to identify where you could be getting a better deal. You might also find that you’re paying for something you don’t need – for example by holding a standalone travel insurance policy when an equivalent cover is already included as part of your packaged bank account.
The first item on my discard pile? An old savings account with a balance of 37p and an interest rate of 0.10 per cent. Just to clarify – it didn’t pay 0.10 per cent when I opened it. These zombie savings accounts – those that have been closed to new customers and had their rates slashed – should be top of your financial decluttering list.
A 2015 market study by the FCA found that longstanding cash Isa customers were receiving 0.87 per cent less on average compared to newer customers; for non-Isa accounts the difference was 0.82 per cent.
The regulator is concerned about a high level of inertia in the cash savings market – in other words, most people are sticking with the same provider and not taking advantage of better deals elsewhere. Don’t fall into this trap – although poor rates have provided little motivation to move your money, the difference between best and worst is enough to make it worthwhile (assuming your balance is a fair bit higher than 37p).
If, like me, you have found better deals elsewhere but have left old accounts open, it’s worth doing some housekeeping. Old current accounts and credit cards can pose a fraud risk – if you’re not regularly checking them you’re less likely to notice if they’re being used fraudulently.
But there’s a balance to be struck – lenders like to see evidence of longstanding relationships, so keeping some old accounts open can be of benefit to your credit rating. Closing all your old accounts and replacing them in one go is not a good idea.
We have relationships with so many financial firms over the course of our lives that it’s easy to lose track – especially when firms change name or merge with another.
Hundreds of millions of pounds are sitting in dormant bank and building society accounts. Any money left untouched for 15 years is given to charitable causes if the customer can’t be reached, although you’ll still be able to reclaim your money after this point. The easiest way to trace lost savings is to use the free service mylostaccount.org.uk, which combines the tracing schemes of UK Finance, the Building Societies Association and National Savings and Investments (NS&I). You need to complete a single form online and you’ll get a response within 90 days.
Along with getting a better deal, cutting unnecessary costs and feeling more on top of your money, the possibility of finding a bit of cash in an account you’d forgotten about is yet another reason to jump on board the tidying bandwagon and get your finances shipshape.
Jenny Ross is Which? money editor