Managing personal finances can sometimes reveal areas needing attention that may go unnoticed in day-to-day budgeting. By regularly reviewing key financial aspects, you can spot areas that may be draining funds or limiting growth. Here are seven financial areas to watch to help ensure your finances stay on track.
1. Dormant Savings Accounts
If you have savings sitting in an account with a low interest rate, your funds may not be keeping up with inflation, effectively reducing their purchasing power over time. While it may seem overwhelming to sift through different options, starting with an idea of how accessible you want your money to be can help you find the right savings account. Checking for higher-interest options could prevent savings from stagnating and potentially losing value.
Currently, inflation is around 1.7%, so savings should ideally earn at least this much to maintain their value. However, some of the major banks are offering rates under 2%, whereas certain easy-access accounts are available at up to 5%. Keeping an eye on available rates could provide a better return on your savings.
2. Staying with a Low-Benefit Current Account
Switching current accounts can be worthwhile if your existing provider isn’t offering competitive benefits. Many banks now provide incentives, such as introductory bonuses, interest on balances, or exclusive access to high-yield savings accounts, for those using the Current Account Switch Service (CASS).
If you’re paying monthly fees for an account but aren’t using its benefits, switching could save you money. Consider accounts that suit your specific needs, including any extras like linked savings accounts that may help you achieve a better financial outcome. It’s often a straightforward process to switch accounts using CASS, so you can make a change without worrying about interruptions.
3. Overlooking Security Alerts from Your Bank
With the constant flow of mobile notifications, it can be easy to miss an important alert. However, monitoring your banking app notifications for unusual account activity can prevent potential issues. Some alerts may notify you of unexpected payments, allowing you to take quick action if necessary.
Banks also use a service called “confirmation of payee” when setting up new payments, which helps verify that the account details match those of the intended recipient. If a warning appears that the names don’t align, it’s wise to double-check to avoid scams. For additional peace of mind, banks have introduced the 159 phone service, a direct and memorable way to reach your bank in case you’re unsure about a message.
4. High-Interest Credit Card Balances
If you’re managing credit card debt, transferring your balance to a 0% interest card may help reduce your interest payments. With these cards, you can pay down the balance over time without the added expense of interest, although it’s essential to check for any fees associated with the transfer and note when the 0% period ends.
Some people may worry that applying for a new card could affect their credit score. To gauge your eligibility, many online tools allow a “soft” check that won’t impact your score. Additionally, setting up an automatic minimum payment each month helps avoid missed payments, which can protect your credit standing.
5. Costly Home Appliances
Certain home appliances consume more energy than necessary when left on or used inefficiently, which can inflate utility bills. Unplugging devices not in use and filling the kettle with only the water you need can help reduce costs.
When purchasing new appliances, consider those with high energy-efficiency ratings, such as washing machines or fridges, as they often use less electricity. Reviewing the size of the appliance you need can also make a difference; for example, a smaller dishwasher might be more cost-effective than a larger one if it rarely fills completely. The Energy Saving Trust offers useful tips on energy-efficient appliances and can help you make more economical choices.
6. Not Actively Managing Your Workplace Pension
It’s important to stay informed about your workplace pension. Checking your current balance and projected value online can give you an overview of your retirement savings, helping you determine if they align with your future needs. Most pension providers offer online access, where you can view your pension’s value, check retirement projections, and even update your investment options or retirement age.
You may also wish to consolidate other pensions into your current plan if it makes sense for your situation. Some providers allow you to transfer other pensions, making management easier. Keeping your address up to date with your provider also ensures you won’t miss important updates or communications.
7. Gaps in Your State Pension Record
If you’re aiming for a full state pension, it’s beneficial to check your National Insurance (NI) record and state pension forecast on the government website, gov.uk. Gaps in your NI record can result in a reduced pension amount, but it’s possible to fill these by making voluntary contributions.
Typically, contributions can only cover the past six tax years, but currently, there’s an extended window allowing individuals to address gaps going back to April 2006. This window closes in April 2025, so if you’re looking to top up your record, you still have time to do so. Each contribution adds to your pension, helping you reach the full state pension amount and ensuring more financial stability in retirement.
Taking these simple steps can significantly improve your financial health and provide peace of mind. By keeping your accounts optimised, staying informed on pension details, and avoiding high-interest debt, you can protect your finances and make your money work harder for you. Financial awareness is key to a secure future, and making proactive choices today can lead to greater confidence in the years to come.
For advice on your pension, please get in touch
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Approved by the Openwork Partnership 5th November 2024
