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Have difficulties managing your money? Try decluttering to get your finances organised.
*This is a collaborative post – for more details please see my Disclosure Policy
Decluttering Your Finances
Like many people, you may have been promising yourself that you’ll get your finances organised for some time. Decluttering your finances is a significant first step in getting back on track with your money management. Read on to discover four simple steps to declutter your finances:
Compartmentalise your money.
Most people tend to separate their clothes into different drawers to make things easier when getting dressed. However, when it comes to finances, most people seem to have all of the money in a single bank account, regardless of its use.
Establishing separate accounts for daily expenses, transport, emergency funds, travel, and so on will give you greater control over your money. Indeed, it makes sense to separate the money you were saving for your holiday and the money you need for daily expenses.
For instance, the money you are saving for a holiday in 12 months would be better off in a savings account where you will earn a little interest. However, the funds you need for your daily expenses need to be somewhere with immediate access. Such as a current account.
It is straightforward to compartmentalise your finances in this way by using an online banking app. Having set up the different accounts for your spending categories, you can move your money easily and instantly.
Conduct regular spending reviews.
Banking applications are also suitable for conducting regular spending reviews. You can quickly and easily check your direct debits and standing orders to ensure they haven’t risen unexpectedly. You may even have payment set up for things that you no longer need or use. Conducting regular spending reviews also enables you to search for cheaper alternatives or cancel services you no longer use.
For the regular automated purchases that you want to maintain, you should set up the payments to leave your account as soon as your income arrives. This type of payment schedule will provide you with a clear idea of how much money you have left for the month. Moreover, it will reduce the stress and uncertainty of not knowing if you have sufficient funds to sustain yourself for the rest of the month.
Kick out your debt.
Being debt free will give you an incredible feeling, and the good news is there is a straightforward method through which you can achieve it. With a few fundamental changes to your lifestyle and sacrificing a few minor luxuries, you can become debt-free and get your finances back on track.
If you have considerable debts getting free of them may seem like a daunting task. To get started, make a hit list of all your financial obligations. Your instinct may be to place those with the largest amount of money at the top of this list. However, you should deal with your debts which have the largest interest rates, first.
Eliminating your high-interest debts will leave you with more disposable income at the end of each month. You can then use this to pay off your lower interest financial obligations.
If you feel that your debts are spiralling out of control, or overwhelmed with dealing with your debts, consider consulting with a debt counsellor. They can give you support and advice on how to tackle your debts.
Be good to your future self.
Becoming financially organised allows you to enjoy your life much more. Although this may be great for the present, it is worthwhile considering yourself in the future. It can be challenging to imagine exactly how your retirement will pan out, especially if it is several decades away.
However, Right now is the best time to start preparing for your life in the future. Starting today will provide you with more time to build your retirement savings and more opportunities to amass more capital for when you need it most.
How to begin saving for your retirement.
The good news here is that you’re likely to have already started saving for your retirement. Even though you may not be aware of it. If you’re an employee, at least 22, and earning more than £10,000 per year, you should be enrolled in a workplace pension.
A workplace pension means that a sum equivalent to 8% of your annual salary goes into your pension every month. This amount is made up from individual contributions of 4% government tax relief providing a further 1% and your employer contributions of at least 3%. Therefore, if you were under the impression that you had no retirement savings, this could come as a pleasant surprise.
The State Pension.
Currently, the age at which you qualify to receive the State Pension is in your mid-60s. However, this age is likely to have increased by the time you retire.
If the State Pension is your only source of retirement income, you should be aware of exactly how much you will receive. Assess whether this amount will be sufficient to sustain the retirement lifestyle you desire. And if not, you need to put other plans in action to boost your retirement income.
Decluttering your finances will not only get you more organised, but lead to a more stress-free life. Hopefully, following this for basic steps will help you get your money less cluttered. And put you on the path toward tremendous financial success.
If you are considering your pension, speak to a regulated financial adviser like Portafina.