There is no better time than right now to start getting into ideal financial shape, and decluttering your finances will help you achieve this. Of course, you cannot eliminate your bills or financial obligations instantly, but decluttering your finances will undoubtedly give you a more stress-free life.
Therefore, check out this 4-step guide to declutter your finances and achieve better money management.
Four ways to declutter your finances
1. Compartmentalise your money
Like having separate folders on your computer or phone, it makes sense to compartmentalise your money. Having different accounts for the various aspects of your spending will provide you with greater visibility and control over your finances.
You can establish any number of compartments, or pots, to help declutter your finances. For instance, you might have one for everyday expenses, another for short-term savings, and one to cover emergencies.
Of course, when you think about it, separating your finances makes sense. For instance, you would not want to spend the money you are saving for a holiday on your commuting expenses. Also, you might not be pleased with having to cut back on your food budget to pay for an emergency such as car repairs. Keeping your money separate will help you remain organised and stick to your budget.
Where are you keep your money is also essential. For instance, it’s pointless keeping your savings in a current account as you will receive little or no interest on these funds. An ISA or savings account is a more suitable place for this money. Avoid financial mistakes, make use of regulated financial advisors such as Portafina before you jump in to big decisions that could affect your future.
It is quick and easy to set up separate accounts with mobile banking applications. You can then set up a routine whereby a certain amount of your income gets allocated to each account each month.
2. Keep an eye on your direct debits and other regular payments
You can instantly access your direct debit payments and other regular transactions with a mobile banking app. Doing so regularly will allow you to check on them to ensure that they have not risen too sharply.
Often, when you check out new subscriptions for insurance, broadband, mobile phones, and so on, you get offered introductory rates. However, after the initial period, the rates can rise sharply. If you do not check how much you are paying, you could find these things are costing you more than they need to.
If you find the costs have become too steep, make sure you shop around for cheaper alternatives. Similarly, for payments you make annually, perhaps such as insurance cover, keep an eye out for renewal notices. These should arrive in enough time for you to get quotes from other providers. Comparison sites are an excellent resource for finding cheaper alternatives.
Finally, for your monthly payments, set them up so that they leave your account just after you have been paid. Doing so will let you see how much money you have left for the remainder of the month.
3. Eradicate your debt
Becoming free of debt is an incredible feeling, And the good news is you can achieve it through making a few minor sacrifices and lifestyle alterations. The challenge many people face when eradicating their debt is focusing on what they have to sacrifice in the short term rather than the long-term benefit of being debt-free.
Understanding where to start clearing your debts can also be a challenge. An excellent first step is to draw up a list of your debts, prioritising those with the highest interest rates. Getting rid of these high-interest debts first means you have more money available to pay off your lower interest obligations much quicker.
Of course, dealing with debt can be incredibly stressful. If you become overwhelmed and anxious, you can contact a debt counsellor for support.
4. Look after your future self
While becoming more financially organised will satisfy you today, you should also consider yourself in the future. Of course, if your retirement is decades away, it can be challenging to picture what your life will be like then.
However, today is the best time to start preparing for your life after you have stopped working. The sooner you start making financial plans and putting them in place, the more opportunity you have to be comfortable in retirement. Let’s take a look at your retirement planning in a bit more detail.
How do you start your retirement planning?
The good news is you may well have already started your retirement planning. If you earn over £10,000 annually and are at least 22, you should be part of a workplace pension scheme.
If this is the case, contributions equating to approximately 8% of your salary get paid into your pension. These contributions consist of personal contributions (4%), tax relief (1%), and at least 3% from your employer.
Of course, you are also entitled to the State Pension. However, the qualifying age for this benefit has risen in recent years and is likely to do so again. Today the age at which both men and women receive the state benefit wrong the State Pension is the same for the first time since its launch.
