Conquer your financial fears
Simplify your personal finances in 2021
To help you kick your money matters into shape this year, we’ve got some terrific tips to share. We’ve also got some quick-fix suggestions from personal finance guru Lisa Conway-Hughes, aka @misslollymoney.
In three steps, here’s how to review your finances, reduce their cost and complexity, and give yourself the chance to relax.
So, where’s the best place to start when it comes to reviewing your finances?
‘I think pensions are the most cluttered area of finances for people,’ Lisa says. ‘It’s mainly from people having lots of short contract jobs, or pensions they’ve just forgotten about from the first job they did.’
According to the Association of British Insurers (ABI), there’s a whopping £19.4bn languishing unclaimed in a total of 1.6 million pension pots. That’s an average of around £13,000 in each one. If you think you might have overlooked a pension, the ABI has got some guidance on how to track it down.
It’s also easy to forget about all the direct debits you’ve signed up to over the years.
‘I think people would be really surprised about how much they’re paying in direct debits they don’t even think about,’ Lisa says. ‘And now, direct debits don’t just come from one bank account – they’re on your PayPal or Apple Pay accounts and so they’re a bit more hidden than you think.’
Are you paying for a streaming service you no longer watch, or insurance for white goods you no longer have, for example?
Once you’ve reviewed a specific part of your personal finances, the next thing to focus on is reducing cost and complexity. So, if you have lots of pension pots, you can think about consolidating them into one. This generally makes things easier to manage and can often reduce the overall amount you pay in charges.
Once you’ve reviewed all your direct debits, you can cancel the ones you don’t need. You might also be able to reduce what you pay for those you keep. For example, it’s easy to end up renewing insurance policies with the same company every year. It might be convenient, but it often means you end up paying more than you have to.
Even a small saving on each of your home, motor, travel and pet insurance policies could quickly add up.
You can never really take your eye off the ball completely when it comes to managing your money. But if you break the job down, you’ll quickly get control of things.
So, what’s the best way to put a proper plan in place? ‘Schedule a little bit of time every month to do a quick financial task,’ Lisa says. ‘In January you could maybe clear out your direct debits. In February you could check your gas and electricity. In March you could check your car insurance.’
On top of the extra pounds this could put in your pocket, it will also give you invaluable peace of mind – and a simple schedule to follow.
Lisa Conway-Hughes is a Chartered Financial Adviser, author of Money Lessons and part of the team at Ladies Finance Club.