Spring is in the air, but if you feel you’re being held back from achieving your retirement dreams due to a lack of available cash, our top tips could help you blow the cobwebs off your finances.
Get canny with credit
Paying off debt is almost always a good idea when looking to take control of your finances. Clear expensive debt like credit cards first as outside of 0% interest offers, the interest on these is usually higher than other forms of debt, such as personal loans.
Julie Doleman, managing director of Experian Consumer, a credit reference agency, says: “Only making the minimum payments on your current borrowing will make it much more expensive to repay what you owe in total – you’ll incur more interest each month and it will take you far longer to clear your balance.”
Either prioritise paying off credit card debt or look for cards that offer low-cost transfers and/or lower interest to give you more time to pay it off. Doleman adds: “If you have a strong credit history you might be able to shave a few points off the interest rate by taking out a new card. Just be careful not to apply for several cards in a short period of time – this can look to lenders like you’re in desperate need of credit.”
Become an ISA expert
Are you making the most of your savings? Interest rates on current accounts are usually very low, so you might be better off transferring any spare cash into a dedicated savings account, or looking at tax-free savings vehicles like ISAs, to benefit from the higher available interest rates. From April, the ISA limit will rise to £15,240.
Gareth Smith, Pensions Support Manager at Skipton Financial Services Limited, says: “Opportunities to reduce your tax burden don’t come up very often, and you should grab them with both hands. Your increased annual ISA allowances enable you to build your savings and investments in a tax-efficient manner.
Take an axe to your outgoings
When was the last time you sat down and looked at exactly what you spend and where? Chances are, there might be a few things lurking in your outgoings that you could trim.
Experian’s Julie says: “Ask yourself: Do you need it and, if so, can you get a better deal? As well as obvious things like insurance and utility bills, things like mobile phone contracts and TV, internet and landline bundles are poor value for money if you’re not using your full allowances. Be ruthless: do you really need that magazine subscription if you don’t read it every month?”
Take expert advice
If you have investments, schedule a meeting with your financial adviser to make sure your money is working as well as it can for you. Skipton Financial Services’ Gareth adds: “A review of your financial situation, with an adviser, is an opportunity to benefit from an expert carefully assessing your savings and investments, including pension provision, to determine if they are suitably positioned for your needs.
“For example, are you over-reliant upon deposit-based accounts to achieve your long-term goals? Are your investments performing in line with expectations? Will your current pension plans provide you what you need in retirement?”
Think about the future
Retirees can find it difficult to get credit if they want to spread the cost of a holiday or emergency purchase, because factors like age and being on a fixed, limited income can weigh against them. Also, as credit reports only go back six years, good credit built up earlier in life – such as paying off a mortgage or always clearing credit card bills – might be outside the scope of a current credit report.
“If you paid off your mortgage early and haven’t needed a credit card for many years, lenders simply can’t judge what kind of risk you’d be as they have very little information on what kind of borrower you are. To that end, try to keep a mail order account or credit card open,” says Experian’s Julie.
Have you given your finances a spring clean? Were you surprised at what you found? Do you have any tips to share? We’d love you to share them with us in the comments section below.
This article has been commissioned by retiresavvy and any opinions voiced are the author's own.
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