Spring clean your finances
3 MIN READ
Spring is a great time to make a fresh start with your finances.
An opportunity to review, de-clutter and reorganise.
But what’s the best way to spring clean your finances? Here are 5 effective approaches to clearing away the cobwebs to shed some light on your money essentials.
1 Sort your paperwork
Firstly, where are all your important documents stored?
Are your bank statements, credit card statements, insurance details, pension scheme information, utility bills etc. filed neatly away on a shelf somewhere easy to find?
Or is your paperwork stuffed into drawers, here and there, and your electronic documents spread all over your desktop or lost in your ‘downloads’ folder?
We all lead busy lives and managing paperwork might not be everyone’s top priority but now’s the time to get on top of things.
Gather up your documents, put them in order and file everything away using a ring binder or wallet folder for your paper documents and a safe, secure place for all your electronic documents.
Now you’ve got everything to hand, it’s time to take a good look at your income and spending.
2 Spruce up your budget
Take a look at your bank statements to work out your weekly or monthly income after tax.
If you’re self-employed or don’t work fixed hours then your income may vary from month to month so work out an average income for a typical month or week based on your last 3 to 6 months’ income.
Then write down a list of all expenses for the things in life that you absolutely need. These might include the mortgage/rent, gas, electricity, broadband, food, medicines and transport that you cannot do without.
Now you know much income you have coming in each month and how much your essentials add up to. Hopefully, your income is at least greater than your essential expenses.
Next, take a look at what you spend on the inessentials – life’s little luxuries – and check whether your income is greater than your essential and your inessential expenses added together.
If not then you will have to cut back or increase your income.
If you already have a budget, check it against what you actually spent over the last three months and your actual income to make sure that your budget is still accurate.
3 Cut back where you can
Are there any inessential expenses that you could cut out to help balance your budget?
You might be subscribing to online entertainment packages that you no longer use now the evenings are brighter or your spending on take-aways might have shot up during the winter.
You might be able to cancel subscriptions and cut back on your take-aways.
If you haven’t looked at the cost of your utility bills for over a year, use an online comparison site to make sure that you’re still getting the best deal on your gas, electricity and broadband.
If you haven’t made your local discount supermarket part one of your shopping destinations, maybe now’s the time to check out what you can save on their ‘own brand’ goods?
These are just suggestions, they might not suit everybody, the important thing is to look for opportunities to cut back.
4 Polish up your future goals
Spring is a good time to think about your longer-term money goals. What are you hoping to achieve in the next year, 3 years, 10 years?
Are you planning to get married, buy a home, buy a car, go on a once-in-a-lifetime holiday, start a family or launch a business?
Almost all our goals need a bit of money to achieve them.
Write down your goals and give each of them a date then work out a rough cost for them. Are they specific, realistic and achievable?
For example, if you plan to get married in 2 years’ time and you think the wedding will cost €28,462 (the average cost of an Irish wedding according to a 2019 weddinsonline.ie survey) then you’ve 24 months to get the money together.
Having long-term goals, like this, may force you to make tough decisions about day-to-day spending but it may also help you to put it in perspective.
5 Brush up on your retirement planning
Have you given any thought to how much income you’ll need when you retire?
Your retirement date may still be over 30 years away or it may be less than 10 years.
However near or far away it is, if you want to keep living the same kind of lifestyle that you enjoy today then you almost certainly need to start saving.
For adults with 48 or more average yearly PRSI contributions, the contributory State pension is currently €12,911 a year (or €248 a week), but the average salary in Ireland is much larger at €46,402*.
And bear in mind that, with longer average life expectancy, your retirement might last 30 years or more.
So if your employer offers a company pension scheme and you are not part of it then you might want to look into it right away.
If you are self-employed or your employer does not offer a company scheme then you might want to consider contributing to a private pension taking advantage of the tax relief on pension contrbutions**
Find out more
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* Source: CSO, Average annual earnings for full-time employees in 2017, Earning and Labour Costs 2017.
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