April marks the start of the new financial year, so there’s no better time to get your finances in shape. Already this year we’ve seen the introduction of the Personal Savings Allowance, which offers savers an annual tax free allowance of up to £1,000 on the interest they earn on their savings.
So, what does this mean for you? Well, for many of us, saving money for the future has become more lucrative. However, to reap the rewards of this change to personal taxation, you need to be saving in the first place. Here are our top tips on how to spring clean your finances and ensure you’re making positive financial steps towards the future.
Set yourself a monthly budget
Keeping track of your monthly income and expenditures is an essential part of ensuring you have money left to save at the end of each month.
Draw up a realistic budget, which factors in everything from utility expenses to unforeseen emergencies, and work out whether your outgoings are fully covered by your monthly income after tax. It’s also a good idea to include the amount you plan on saving each month within your budget, so you’re putting aside a set amount on a regular basis.
Another factor to consider is that it’s unlikely you’ll be spending the same amount every month. For instance, the festive season tends to take more of a toll on your bank balance than the rest of the year, so you might want to think about saving a little bit extra throughout the autumn to cover the cost.
Finally, don’t forget to include your leisure expenses. Your morning coffee and post-work drinks are outgoings that can easily slip under the radar but will quickly start to drain your savings pot.
Cut unnecessary spending
Once you’ve put together your budget, have look to see if you’re making any unnecessary expenditures.
Are you a member of a gym that you never go to? Or could you be shopping at a cheaper supermarket? Identifying areas where you can reduce your weekly outgoings is one of the easiest ways to increase your savings. You can also ensure you’re paying the right amount for your utilities by taking regular meter readings and claiming back money if you’ve been overcharged.
If you’re feeling ruthless, you might want to think about giving up some of your little luxuries, such as eating out or your Netflix subscription. Although this may seem drastic, it could mean being able to reach your financial dream such as buying your first home.
Find out how you can take your first steps onto the property ladder in 2016.
Ensure you’re using the right savings account for your needs
Do you know your Easy Access Account from your Fixed Rate Cash ISA? Different types of savings accounts have different benefits, so it’s important to choose the right one depending on what you’re saving for.
It’s worth doing a bit of research to ensure you’re using the right type of savings account for you. For instance, if you want to protect your savings from interest fluctuations, you might want to think about putting your money into a Fixed Rate Account, so you can easily plan your future finances.
Alternatively, if you’re using your account to save for a short term goal such as a holiday, you could be better off using an Easy Access Account where you can add to or withdraw your savings whenever you need to.
Prepare for retirement
If you want the added security of having a regular income when you retire, you usually have to enter into a pension scheme. For many of us, this will have been set up by our employer, however it’s still important to keep on top of these savings.
If you’ve had multiple jobs over your working life, you might find you’ve got more than one pension pot and may want to consider merging them. It’s also important to ensure you’re paying in an amount that’s proportional to your earnings, so you could consider increasing your pension contributions. You can also set up a personal pension yourself if you’re self-employed or your employer hasn’t set one up on your behalf.
Have a plan for the future
One of the best ways to ensure you stick to your savings plan is to set yourself a savings goal. Whether you’re saving for your first home, a luxury holiday or to pay off your mortgage, giving yourself something to save towards means you’re less likely to dip into your account every now and again.
As well as establishing a savings goal, it’s also important to have a long term financial plan so you know you’re on track with repaying any debts and have realistic expectations about when you’ll reach your target.
At Aldermore, we believe that saving should be as straightforward and as rewarding as possible. Take a look at our savings pages to find our range of award-winning personal savings accounts.
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