This month is National Stress Awareness Month and with the current cost of living crisis, money has become a major source of stress for many of us.
With financial stress often being a difficult subject to tackle, money.co.uk savings expert Lucinda O’Brien has provided her expert tips on everything you need to do to avoid being overwhelmed by your finances.
1. Check-in on your financial health – The new financial year is a great time to check in on your financial health. Start by assessing your bank statements. Look at how much money you have saved across your bank accounts, as well as your ingoings and outgoings from the last few months. From here, you can review your spending and identify where you can cut back to save more money. You should also check that you have received all expected payments to your accounts. For example any benefits you are entitled to, invoices owed or online order returns processed.
2. Make a financial plan – A financial plan is a great way to detail your current financial circumstances alongside your financial goals which can either be long-term or short-term. This plan will help you to keep track of your money and highlight potential saving opportunities.
This is particularly important in this financial year due to the rising costs of inflation and interest rates meaning that we are spending more. In addition to this, those who earn over £125,140 a year will be hit with the highest tax rate of 45% from April 6th, decreasing their take-home pay throughout the 2023/24 financial year.
3. Set a monthly budget – Within the financial plan you will also be able to dictate a monthly budget that you can then follow during this tax year. One of the most popular ways to budget is the 50/30/20 rule which involves 50% of your salary going towards essential expenses, 20% goes into a savings pot and 30% is for fun.
4. Switch providers – The start of the financial year is a great time to switch energy and broadband providers to help save you money, especially as it falls only a couple of days after the 1st of April, also known as Price Hike Day. This year it was announced that the cost of water, broadband and phones were set to increase, meaning that your bills could increase significantly if you don’t shop around for a new deal.
5. Open up an ISA – An ISA is a tax-free savings or investment account that allows you to save up to £20,000 each financial year tax-free. This means that you can maximise the potential returns you make on your money. Your ISA allowance will reset on the 6th of April, meaning you can save an additional £20,000 this financial year, tax-free. There are several types of ISA you can invest in including Stocks and Shares ISA, Cash ISA and Lifetime ISA. Before opening up an ISA you should consider your saving goals. Lifetime ISAs are great if you are saving for your first property or retirement, while Stocks and Shares ISAs are perfect if you want to begin investing.
6. Get ahead if you’re self-employed – If you’re self-employed, the new financial year can be a great time to get your business finances in order for the year ahead. Although your tax return for this financial year won’t be due until late 2024, organising your business receipts and invoices in an orderly manner throughout the year will be a great help when it comes to filing your tax return. A great way to do this is by scanning your business receipts immediately and then uploading them to a file with all your business receipts from each month on platforms such as Google Drive.
7. Review household bills – Household bills have increased once more but to avoid becoming overwhelmed by this news, the first step is to check your bills to see how much they have increased. You can also contact your providers to discuss what the increases will mean for you and whether there is any support available.
It’s always best to know exactly what you’ll be paying each month, so use this increase as an opportunity to audit your finances and evaluate your outgoings.
8. Look at your savings goals – We should all have some financial goals, whether it is saving for a deposit for a first home, ensuring a future retirement pot remains healthy or paying off high interest debts. So, if you don’t have any goals now is the time to set them. Alternatively, if you’ve always had the same goal, maybe it’s time to check whether it’s still relevant and revise if something else is more appropriate.
Consider your expected income and expenses throughout the year, as well as your saving goals. By doing so, you can set realistic savings goals for each month and create a plan for achieving these savings.
9. Compare savings accounts – Now you are armed with the knowledge of your savings goals, financial plan and monthly outgoings you can use this information to find the best savings account. In the financial plan, you should have factored in a realistic savings goal and this will help you to choose a savings account.
Is your goal long-term or short-term? This is an important question as it’ll influence which account to choose. For example, if you don’t need the money for a few years, a fixed-rate bond is a good option because you’ll be rewarded with a competitive interest rate. That being said, a fixed-rate bond normally allows one deposit and often no withdrawals at all during its term, so this account would only work best if you already have a lump sum saved. If you are looking for a flexible savings account, then an instant or easy access account ticks a lot of boxes and will help to get your savings on track with the added bonus of interest.
10. Keep your pension in check – Look at your state pension and work out how much money you will receive when you retire. Remember, you’ll need 35 years of National Insurance credits to qualify for the maximum amount. Once you know this figure, then look at your workplace pension and try to group together any old pensions from previous jobs in one place, so you know exactly how much you’ve saved so far. With this information you can then appropriately plan for your retirement.
A lifetime ISA can also help with saving for this purpose as it offers an attractive 25% bonus from the government. The ISA allows you to save up to £4,000 every year and then you’ll receive up to £1,000 from the government between the ages of 18 and 50. You’ll then be able to access the money for retirement when you turn 60 years old.
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