How to take stock of your finances this bank holiday
Bank holiday season is upon us, which can only mean two things: the rain is back, and we’ve finally got some time to ourselves.
It also means we’re likely stuck indoors, so before you accidentally spend it doomscrolling or getting sucked into a 52-episode binge-watch, it’s worth putting aside some time for the financial maintenance jobs that will stand you in good stead for the rest of the year.
Here are five things you can do to take stock of your finances this bank holiday season.
This is an hour that can save you hundreds of pounds. There are two things to check: are you paying for anything you don’t get enough value from? And are there any payments you haven’t revisited in a while?
If you unearth forgotten subscriptions or memberships, there’s serious cash to be gained from cancelling.
However, before you do, check you’ve completed any minimum terms and get in touch with the company to let them know you’re cancelling.
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If you realise you haven’t revisited things like media packages, mobile phone payments or utilities, now is the time to do some shopping around. The return of decent fixed rate gas and electricity deals means this could be a particularly fruitful thing to check.
Far too many people plough through life without a plan, so it’s no wonder they run out of money before the end of the month. If you’ve never done one before, drawing up a budget isn’t a particularly exciting job, but an hour with a budget planner can reap real rewards.
You’ll need your bank statements or app to see how much you spend in an ordinary month, plus statements for expensive times of the year like Christmas, so you can plan for those too.
Armed with these details, you need to plug your income and spending into a budget planner. Hargreaves Lansdown has a household budget planner, but there are loads of them online – including one on the MoneySavingExpert website.
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If you’re struggling with how to allocate the cash, simple rules of thumb can help – like spending 50-60% of your money on the things you need, 20% on saving and investing for the future or dealing with debts, and 20-30% on the nice-to-haves. How useful this rule is, depends on how much you need to spend on the basics, but it can help to start here.
Once you’ve added up what you currently spend, you can consider where you need to make cuts, so you end up with some cash over at the end of the month.
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You need to decide the best ways to use the money you’ve freed up – which will depend on your circumstances.
If you have expensive short-term debts, it usually makes sense to use at least some of the money to pay those down.
Business woman working with a laptop from home. Home office, technology and business concept. · David Espejo via Getty Images
If you don’t have an emergency savings safety net of 3-6 months’ worth of essential expenses, that’s also a priority.
However, it’s important not to lose sight of the long term, like pensions and investments. If you’re constantly side-tracked by the short-term it’s easy to fall behind. Most people will divide the money they free up between a number of pots.
The extra time afforded by a bank holiday means you have the space to think about the bigger picture. What do you want to achieve this year – both from your money and your life?
What do you want further ahead? How, when and where do you want to retire? It can be easy to be on the conveyor belt of life and not take time to step off and consider what you really want.
When it comes to pensions, think about the income you need in retirement, then use a pensions calculator to input what you’ve put aside so far, what you’re paying each month, and see what this is likely to leave you with.
This will show you whether you’re doing enough for the retirement you want, and whether you need to rethink your contributions, your investments or your goals.
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Download the Yahoo Finance app, available for Apple and Android.
