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After a long and dreary winter, spring is finally here. Now that March is upon us, you’re probably looking forward to longer days, warmer weather, and the blooming of flowers. Many people use this time of year to tidy up their homes by making repairs, cleaning, and planning ahead for the summer. If you’re one of them, this year you may want to consider sorting out some minor financial jobs too. Taking a little bit of time to sort these out can really benefit you in the long term, so here are five useful ways to spring clean your finances this March.
1. Get your important documents in order
If you’re ever unable to manage your own financial affairs, it can give you peace of mind to know that someone else would be able to act on your behalf. For example, they could pay your utility bills or make mortgage repayments while you’re not able to. This is why it’s important to have an In Case of Emergency (ICE) folder, which contains all your important financial documents. Having them all in one place can be very helpful if someone needed to step in to manage your financial affairs on your behalf. Some of the documents you may want to include in this folder include:
- Records of your insurance policies
- A list of your bank, investment, and pension account numbers
- Details of your outstanding debts (such as your mortgage or credit cards)
- Home and car ownership documents
- Contact details for your insurers, banks, and financial planner.
Once you have all of these in one place, it’s important to store the folder somewhere that’s easy to find, in case your loved ones ever need to access it. You may also want to create a digital backup copy, which you can keep on a USB stick or in secure cloud storage.
2. Check your protection
Another important financial job you should do this spring is to make sure you have the right protection for your needs. As your lifestyle changes, your requirements will change too, and this is why it’s important to regularly review your cover. Whether you’ve just had children, started a new job, or taken your first step onto the property ladder, it’s important to ensure that you’re fully protected against any unexpected issues. If you’ve passed a major life milestone since you took out your protection, speaking to a financial planner can help you to assess whether your needs might have changed. This can help to give you much greater peace of mind to know that you’ll be able to overcome any obstacles.
3. Review your investments
To make sure that you’re on track to reach your financial goals, it’s important to regularly review your investments to know that they’re still working hard for you. If your plans have changed, or you’ve experienced a major financial disruption in your life, you may need to reassess your investing strategy. For example, in recent months there has been a significant increase in the rate of inflation. According to the Office for National Statistics (ONS), the Consumer Price Index rose to 5.5% in the year to January 2022. During periods of high inflation, your investments need to work harder to grow in real terms. This is why you may want to consider reassessing your tolerance to risk, so that you can potentially earn greater returns. Furthermore, if some sectors of your portfolio outperform the others, you could run the risk of being overly exposed in that particular area. This is why it’s important to regularly check to see if you need to rebalance your investments. We can help with this.
4. Track down any lost pensions
If you want to enjoy a comfortable lifestyle in retirement, having enough wealth to support it is essential. So, it’s important to ensure that all of your pensions are working hard for you. If you’ve had several jobs over the course of your working life, you’ve probably been enrolled in more than one workplace pension scheme. If you’ve lost track of any of these pots, taking the time to find them again can be very beneficial. According to figures from the Times, there are more than 1.6 million lost pensions in the UK. With a combined value of more than £19.4 billion, that means the average one contains around £12,000. Of course, even if yours don’t contain this much, it’s important to remember that every little helps! When it comes to tracking down lost pensions, a good start is to get in touch with previous employers, who may have records of them. Alternatively, you could also speak to the pension provider that your old company worked with. Finally, if you’re still struggling, you can use the government’s pension tracing service to try and find them.
5. Make the most of your allowances
Since the new tax year begins on 6 April, now is a good time to make the most of your allowances before they reset. For example, Individual Savings Accounts (ISAs) are a tax-efficient way to grow your wealth, as any interest or returns are paid free from Income Tax or Capital Gains Tax. In the 2021/22 tax year, you can contribute up to £20,000 into ISAs but, as this allowance doesn’t roll over, it’s important to make the most of it. Another important allowance to bear in mind if you invest your wealth is your Capital Gains Tax (CGT) allowance. This is essentially the amount of profit you can make from selling non-ISA assets before you have to pay tax and, in the 2021/22 tax year, it stands at £12,300. If you have a partner, this limit is doubled, so if you’ve used up your allowance, you could potentially transfer an asset to your partner before selling it. This can help you to reduce the amount of tax you would have to pay. If you want to be able to navigate tax laws and maximise your allowances in the most effective way, working with a financial planner can help to give you greater confidence and peace of mind.
Get in touch
If you want to spring clean your finances and think you would benefit from seeking professional advice first, we can help. Email us at office@verve-financial.com or call 0330 320 5048.
Please note:
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. Investors do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers. Tax treatment varies according to individual circumstances and is subject to change.
This item was correct at the time of writing and the information contained may no longer be up to date.
