Ten steps to take for a full financial spring clean: Sarah Coles

1. Take stock of everything you have

The untidy corners of your home are obvious. The same can’t be said for your finances until you lay it all out. This means looking at your spending, saving, borrowing, insurance, pensions and your will. Try to establish a broad understanding of where you are, and the areas that need attention.

1. Sort out your paperwork

If you have a big pile of unread letters, or a stack of paperwork you need to file, you’ll know exactly what this means. However, that’s not the beginning and end of it. You should also consider whether you have sight of every account, or whether you need to track down lost things – like student loans or old pensions.

If you have lots of different accounts, once you’ve found them, you can consider bringing them together in one place.

1. Tackle your current account

There are a few key checks. The first is making sure you recognise all the things coming out of your account. Next, you can decide what to cancel. This includes not just direct debits but also regular payments. Before you cancel the payments, check with the firm that you’ve completed the minimum period and follow their cancelation procedures. Finally, look through your spending, and see whether it reflects how much you’ve budgeted to spend in each area. If you don’t have a budget, this will be your next job.

1. Draw up a new budget

This should include everything coming in and everything going out. If you haven’t done this before, it’s an eye-opening experience. If you’re updating an old one, you could be shocked at how much more expensive your bills are now. It’s worth using an online budget planner, which makes this easier, and will nudge you to include less regular expenses too. Once you’ve put your initial figures in, you’ll need to tweak them to make the sums add up, and try to give yourself something left over to put towards your most important priorities.

1. Work out what your top priorities are

This will depend on where you stand right now. If expensive debts are draining your finances, then it can make sense to start by paying those back. If you’re more on top of your debts but have no protections in place for your family, you may want to consider insurance. If those things are in hand but you don’t have enough emergency savings to cover 3-6 months’ worth of essential spending, you may want to set up a direct debit into regular savings. At the same time, don’t neglect your pension, or long-term investments. These should run alongside your short-term priorities.

1. Get a better deal

Whether you’re carrying debt balances or looking for a home for your emergency savings, it pays to shop around for the best possible deal. Online banks and savings platforms tend to offer much better savings rates than high street giants, so it’s worth having a look.

1. Check what you get from work

You may not pay it much attention while the going is good, but your employer might offer everything from life insurance and a pension to income protection, critical illness cover and sick pay. It’s worth exploring what you get from work, and whether it’s enough for your needs, or whether you need to make other arrangements yourself.

1. Do a pension calculation

Every year it’s worth digging out your paperwork, so you know how much you’ve saved into any pensions or SIPPs, and how much you and your employer are currently contributing. You can then plug this into an online pension calculator, to find out what kind of retirement income you can expect as a result. Then you can play with the calculator to see what you need to do in order to get the retirement income you need. If you can’t afford to boost pension contributions immediately, you can at least ensure it’s top of the list next time you change jobs or get a pay rise.

1. Weigh up your investments

For investments - both in pensions and stocks and shares ISAs - it pays to take stock annually. You need to make sure the objectives of the funds you’re investing in still match your needs. You should also make sure they haven’t been unbalanced by lumpy growth, and use a portfolio x-ray to check they’re not unduly concentrated in a few stocks. Finally, check they’re performing as you expect.

1. Consider your will

These need to be revisited regularly. If your family expands, you may need changes to accommodate new members. When your life changes, you might need a new executor or for assets to be divided differently. This is also a chance to make sure you have done the essential things that go alongside your will. These include setting up a lasting power of attorney, making a register of all your assets and accounts, and updating your letter of wishes outlining specific bequests.

Having been through a financial spring clean recently, I discovered I’ve been wasting £40 a month on membership of a sports club nobody went to anymore. I’d missed it because it was coming out of my account as a regular payment rather than a direct debit. I also discovered that my will contained a clause that would have caused an issue because of a rule change that happened in the interim. And the best bit was that I got to blow the dust off my paperwork and file it – which satisfied the drive to spring clean my home too.

Financial lives

An FCA study out this week found that during the cost-of-living crisis, 44 per cent of people stopped or cut saving or investing to make ends meet, 23 per cent used savings or investments to cover daily expenses and 22 per cent cancelled an insurance policy to save money. Meanwhile, 3 per cent stopped paying into a pension and 2 per cent cashed in a pension fully or took out a lump sum to cover day-to-day expenses.

If your wages are doing a better job of keeping up with inflation now, and you’re feeling life getting marginally less difficult, it’s vital to take the opportunity to rebuild. If you stopped paying into your emergency savings, or you spent your way through at least some of them, now is the time to start building it back up. If you stopped investing regularly during tougher times, you also need to consider the potential to restart investments. And if you stopped paying into a pension, or cut contributions, it’s worth finding out where you stand as a result.