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How to sort out your finances

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There are a few ways to sort out your finances, these include:

  • Tracking your spending
  • Working out a budget
  • Switching service providers or bank accounts
  • Managing your debt
  • Build your emergency funds pot
  • Start saving

In this guide, we’ll talk through how to do each of these things, and give you useful tips on how to take control of your finances.

Person sorting through their finances

Look at your income and spending habits. Getting an idea of what money you've got coming in and going out can help you to budget.

Spending can be split into two categories: bills and lifestyle. Bills might include things that are unavoidable outgoings. Rent or mortgage, utilities, food, insurance and travel. Lifestyle outgoings may include a gym membership, subscriptions and entertainment.

There are easy ways to track this now, you don’t have to just rely on your spreadsheet skills. Banking apps can do a lot of the work for you, and some apps even split out your income and expenditure into ‘pots’ you can define.

Some banks allow you to set limits on their app and will send you notifications when you’re approaching your set limit. You can opt to keep an eye on spending for a month, or you can look back at previous months to gauge your spending.

Don't ignore your finances. Checking your account regularly could help you to feel more in control of your spending.

Once you have an idea of your spending habits, you can work out a budget.

The importance of individual lifestyle spending differs from person to person. But it can be a good place to start if you’re trying to find things to cut back on to keep within your budget.

For example, if you find your social life is having a real impact on your expenditure, you could suggest alternative social activities like hosting dinner instead of eating out.

You can also look to slim down your subscriptions, particularly if there are services you find you rarely use.

Switching to a new account provider that offers a better deal can earn you a reward.

  • Switching your current account could get you a reward, typically between £100 and £200. With the Current Account Switch Service (CASS), this has never been easier.

Compare current accounts

Switching to a new provider or service that offers a better deal could save you money.

  • While switching your energy provider might not save you as much as it used to, some energy suppliers have reintroduced some fixed deals. With the price cap level set to rise to £1,928 from 1 January 2024, it might be worth doing some comparisons now.
  • You can look to switch your broadband provider as soon as your contract term is up. Shopping around can save you money. Some providers may also offer TV subscriptions as part of a package, so you might be able to cancel some existing subscriptions too.

If budgeting is difficult because of debt repayments, then it could be worth looking into other options to manage it.

Consider whether you’re paying off more in interest each month than on paying the balance you owe. If you are, there may be some options available to reduce or even remove any interest due for a period of time:

0% balance transfer card

If you have a credit card that charges you interest each month, then it could be worth considering a 0% balance transfer card. This means you’d apply for a new credit card.

Then, the provider assesses your circumstances and if you're approved they offer you a new card. During the application process you can tell the new provider you’d like to transfer a balance from an existing card.

If everything’s approved you receive your new card and your provider should transfer your balance within a week or so. Usually there’s a fee of around 1-3% of the amount you're transferring, so be sure you know exactly what charges might be added.

0% money transfer credit card

This type of card lets you transfer money from the credit card directly into your current account as cash.This can then be used for a variety of things such as paying off existing debt.

These cards often have an interest-free period but there is likely to still be a minimum payment each month. It's important to check the terms and conditions and make sure that the product is right for you before applying.

Check your eligibility for a credit card

Debt consolidation loan

If you have a mix of debts across credit cards, store cards and overdrafts then you could look at getting a debt consolidation loan. You can decide on the amount you want to borrow and a repayment term that suits you.

You can then use the loan to consolidate existing debt, simplifying what you pay back each month. You might pay more interest in the long run though, so it’s important to check you’re happy with the terms of the loan.

Before you take out additional credit

Make sure you’re comfortable with what you owe and when you need to pay it before you take out additional credit.

If you’re struggling financially, there’s support available including charities such as Step Change. You should always speak to your bank or credit providers if you’re struggling as soon as you can. They may be able to offer a different repayment schedule, freeze interest or repayments for a period of time.

Building an emergency fund can be helpful in the event of something unexpected happening. If you lose your job, fall ill or receive an unexpected bill then having some cash set aside could prevent you needing to borrow money.

It could be a good idea to work out how much you think you can set aside each month. Work out an amount you think you might need and then plan how you intend to save for it. How much you need to save depends on your personal circumstances and what works for you.

If you are thinking of setting aside some money each month, then it could be a good time to consider opening a savings account.

With the Bank of England’s decision to raise the base rate on 14 consecutive occasions, interest rates on some savings accounts are at a 15-year high.

The monthly average for savings accounts currently stands at 4.5%. And on some fixed rate savings accounts the interest rate is around 6%.

It may also be worth looking at your pension as well. Saving for retirement isn’t something we necessarily think about on a regular basis.

But making sure you’re putting enough away to ensure your retirement is comfortable can offer real peace of mind.

Check your workplace pension, your contributions and your employer’s contributions. Some employers allow you to choose the amount that you pay into your pension and may also match it. Plus, pension savings are tax-free too.

Compare savings accounts

By keeping a regular eye on your finances, you can feel more in control. Implementing some helpful cost-saving measures can save you money in both the short and long term.

It can feel overwhelming, but with regular tracking, budgeting and cutting back unnecessary spending you could see quick results.