There is no time like the present to start getting organised, including your money management. By decluttering your finances, you will not only lower administration, but you will help reduce the stress in your life.
If you can achieve a slightly less stressful life, that has to be reason enough to declutter your finances. Therefore, read on to discover a four-step guide to help say goodbye to stress by decluttering your finances.
1. Keep your money compartmentalised.
Just as you would with your clothes in a chest of drawers, keep your money separated in different bank accounts. For instance, you could set up separate accounts for food, utilities, entertainment, household expenses, and so on.
Compartmentalising your money in this way makes it easier to manage, gives you greater visibility of your spending, and ensures that essential bills will get paid. Also, it does not make sense to keep the money you are saving in the same account as that used to pay your bills. In this case, an ISA would be a better place for your savings, as you can accrue some interest.
Compartmentalising your money is straightforward using a mobile banking app. You can move money from one account to another with a couple of taps on the screen.
2. Regularly check your direct debits.
Many people fail to check what is coming out of their accounts every month through direct debits. If they were to, it would likely come as a shock.
Direct debit payments for broadband, TV and mobile phone services can rise sharply without you noticing. By reviewing your direct debits, you can assess whether you are using these services sufficiently to justify spending on them.
Even if you still require the services, you can look for cheaper alternatives. A good starting point is to compare your provider with others using online comparison sites. You can do this for other regular payments such as insurance.
As part of your check on your direct debits, ensure that they are being paid at the best time. That means setting up payments to be taken shortly after your payday. Doing so will inform you how much money you have for the remainder of the month. Having your bills paid on time will remove the stress of missing a payment.
3. Eliminate your debts.
There are a few better feelings than becoming debt-free. The stress of living with debt can affect every aspect of your life. Therefore, you should make eliminating your debts a priority.
The good news is you can become debt-free by making some minor lifestyle changes and sacrificing certain things. Of course, you might miss some things in the short term. However, focus on how good you will feel when you eliminate your debts rather than concentrating on the short-term pain.
Many people feel overwhelmed when it comes to eliminating their debts, as they do not know where to start. Producing a list of your debts is a good starting point. Rank your list in order of interest levels, with the highest at the top. Tackling the high-interest debts first will leave you with more disposable income to then take on the lower-interest obligations.
Dealing with debt can be stressful. If you feel you are struggling because of your debt, a debt counsellor can provide you with some support.
4. Be good to your future self.
Decluttering your finances is excellent for removing stress today. It is also a good idea to organise your finances for the future.
Of course, it is not straightforward to predict the future, especially if your retirement is several decades away. However, try to build a picture of how you want your retirement years to look and how much money you’ll need to achieve that.
One thing is for sure, and that is if you start to save today, you’ll have more money available to enjoy your retirement.
Start saving for your retirement.
If you haven’t already started saving for your retirement, you could be about to read some good news. As an employee earning over £10,000 annually and aged at least 22, you should be automatically enrolled in a workplace pension scheme. That means around 8% of your gross salary value goes towards your retirement. This money comprises 5% of your salary and a 3% contribution from your employer.
There is also the state pension to consider. Currently, the qualifying age for this benefit is in the mid-60s for men and women, but that is likely to rise. Although the state pension is an excellent supplement to your retirement income, it is unlikely to support you on its own. Therefore, you should consider establishing other sources of income for when you stop working. Financial planning can be complex. It is always recommended that you use the services of a regulated advisor like Portafina when making financial decisions.