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Financial adviser’s top tips for spring cleaning your finances

Financial Adviser Hugh Breach gives his top tips for revisiting, reviewing and reorganising your finances.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Having a clear out and a thorough tidy up may be common place around your home. But when was the last time you did the same for your finances?

Here are some top tips for spring cleaning your finances.

This article isn’t personal advice. Investments can fall as well as rise in value, so you could get back less than you invest. If you’re not sure if a certain action is right for you, ask for financial advice.

Before you start tidying and sorting

1. What do you want to achieve?

This is actually two questions rolled into one. What do you want to achieve in the long term? What do you want to achieve by spring cleaning?

Let’s address the first question. Your long-term goals should always dictate any decisions you make about your finances now. Remember, investing is about the long game. Before you have a clear out of your portfolio, remind yourself of what you’re aiming for.

So how can spring cleaning help you achieve your long-term goal? Perhaps bringing all your investments under one roof will help you see if you’re on track? Or maybe you think some of your investments are holding you back. Once you know what’s going to make the most difference, you can get to work.

2. Create an inventory list

You need to know what you’ve got, in order to know what to get rid of.

As with any financial planning, it’s always a good idea to get your partner involved and anyone else who might be affected by your plans. By looking at what you’ve got together, you’ll be able to find a clearer way to tidy up and simplify.

It can help to draw up an asset register and update it whenever things change.

In some cases, there might be things which you’ve forgotten about. Lots of us will have several jobs over our lifetime and that can mean lots of pensions with different providers – some of which may be lost in the ether. The government's free Pension Tracing Service can help you find them. You just need the name of your old employer, or the name of the pension provider.

How to spring clean your finances

Once you’ve asked yourself what you want to achieve and worked out what you have, you can move onto spring cleaning your finances. Here’s what to think carefully about when revisiting your finances.

Does it bring any value?

Let’s say you’re clearing out the garage. You stumble across a gadget you got for Christmas five years ago but have only used once. It’s not of any value to you so it’s a straightforward decision to give it to the charity shop or someone who might get use out of it.

But value is harder to define when it comes to your finances.

Looking at investments in particular, you might have a fund or share which has been underperforming for a while. Cutting it out of your portfolio might seem like the obvious option. But past performance isn’t an indicator of future success. That particular investment might match your attitude to risk or be helpful in diversifying your portfolio.

So don’t be too hasty – think carefully about where it fits into the overall picture of your investments.

Am I being sentimental?

I’ll be honest, I’ve got a stack of sports kit from sports I don’t even do any more. But I keep hold of it because it reminds me of good times with my teammates and things I’ve achieved.

Time and again, I come across clients who’ve clung on to investments simply because it was their first one, or because it’s a company they have a connection to.

Unlike my old sports kit, clinging on to old investments could be holding you back. You should put sentiment to one side and go back to the question above: does it bring value?

Another great question to ask yourself is, if I were investing new money today, would I put it into that investment?

Am I doubling up unnecessarily?

I tend to upgrade my phone when my contract runs out. And I tend to go for the same brand of phone. New phones always come with new chargers. But why don’t I bin the old ones? Now I have 10 chargers clogging up my drawer with no real need for them.

A drawer full of wires is a clear sign that you’re a hoarder of chargers. But doubling up in your portfolio might not be as obvious. For example, you might have shares that you’re already investing in through a fund. You might think this makes your portfolio diversified, when really all you’re doing is doubling up on fund or dealing charges.

Of course naturally there will be some cross over. And just because you might hold a share and invest in it through a fund at the same time, doesn’t mean you shouldn’t hold the fund. Just be careful that you’re not investing too much in the same areas.

If your portfolio has lots of different funds and shares, checking if you’re doubled up can be a laborious task. An adviser can do the hard work for you and let you know how to make your portfolio more efficient and properly diversified.

Could I keep this all in one place?

If you’ve been saving and investing for a while, you might have savings and investments with different banks, investment platforms, pension providers and so on. Bringing as much of this under one roof as possible will make things easier to manage and could help streamline your portfolio.

But moving things around isn’t always the right thing to do. The decision to move or consolidate pensions is one which you shouldn’t take lightly. Sometimes, moving your pension could mean you lose out on valuable benefits, guarantees or end up paying excessive exit fees, so you could be worse off. That’s why it’s important to check beforehand.

If you have lots of savings accounts, it can be tough to keep track of them all while trying to find good interest rates. Hargreaves Lansdown’s Active Savings service can help you find competitive rates on the market and help you keep track of your cash.

Are my contributions enough?

This is another question which is actually a few questions rolled into one. Are you contributing to your savings or investments regularly? Could you afford to contribute more? Are your contributions going to the right place?

The 2021/22 tax year is still in its infancy so now is a good time to think about how you’re using your ISA allowance. You might prefer to just add in lump sums. But it could be worth thinking about chipping in smaller amounts regularly to get your money working as soon as possible.

You should also make sure you’re making the most of your employer’s pension benefits. They might match or more than match your contribution, so an extra percent could really help top up your retirement savings. Remember though, money in a pension can’t normally be taken out until age 55 (57 from 2028).

And never forget to top up your cash savings. Having easy to access cash reserves is essential for covering a loss or reduction in income. We think ideally, you should have 3-6 months’ worth of essential expenditure in cash savings. If you’re retired, you’ll need more – 1-3 years’ worth is sensible, but everyone’s circumstances are different.

Does all this sound like a big chore?

You might revisit your goals and your portfolio and find not much needs to change.

But if you’re unsure or you think lots needs to change, it can be tricky getting started.

Expert financial advice can help you revisit your goals and put an action plan together. An adviser can give you the reassurance that you’ve tidied and adjusted your finances in a way that keeps you on track.

Book a call to find out more

Book a call with our advisory helpdesk to find out if advice could help you and the charges involved. They won’t provide personalised advice. But they’ll help you decide if advice is right for you and answer any questions you might have.

They’ll then pass your details onto one of our qualified advisers who can chat to you about your personal circumstances.

Book a call

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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