Konmari your finances
Published in 41 regions and countries, and over 5 million copies sold worldwide, it’s fair to say that Marie Kondo’s ‘The Life Changing Magic of Tidying Up’ was a hit. If you haven’t read it, don’t worry – the premise is simple.
In order to declutter the Japanese way, Kondo tells us to keep the possessions that bring us joy, and ditch the rest. Essentially, appreciate the things we love.
Now, while you may not ‘love’ your pension, it should bring you both stability and joy in later life. So, we thought, could we apply Marie Kondo’s theory to our finances?
1. Bring your savings together
In previous editions of the magazine, we’ve talked about consolidation. In today’s world, people have diverse careers often involving multiple jobs with different companies. You might be surprised to find that, on average, an individual will work for 11 employers* during their lifetime. This means that you could easily have several pension pots from different employers and with different providers. As you can imagine, this can lead to lost savings pots.
It’s very hard to plan for the future without a full view of your current savings and it’s important to have a good idea of how much your pension is worth.
Bringing your pots together might have benefits that you hadn’t considered. Many older-style pensions often have complex or more expensive charges, and they’re also unlikely to offer access to the new range of pension freedoms or give access online. However, there are pros and cons and it’s important to think about what’s right for you and to consider things like guarantees or benefits you might have.
We’ve created a simple step-by-step guide to getting on top of your retirement income and making sure you’re saving enough for the retirement you want.
If you’re unsure about bringing your pension pots together you should get some advice or guidance.
2. Eliminate any lingering debt
Decluttering debt will give you a wonderful feeling and could make you feel less stressed and more in control of your finances again. Start today. First, go through your files and your inbox for any letters or emails you may have had about debt or bills and total them up. There are also things like Council Tax, rent and energy bills and direct debits to check, as well credit card debts and loans.
Many credit card companies offer 0% interest deals so if you have a good credit rating, you can move your debt into one place and save interest. Watch out for the sting in the tail – there can be fees of 1.5% to 3% of the balance you transfer.
If you have a number of debts, these may be overwhelming but it helps to draw up a plan on which ones to pay off first. Some debts are more urgent than others.
The Money Advice Service can help and always recommends that you always pay off the following debts first as these carry the most serious consequences if you don’t repay them.
- Court fines
- Council Tax
- TV Licence
- Child maintenance
- Gas and electricity bills
- Income Tax
- National Insurance
- Mortgage, rent and any loans secured against your home
- Hire purchase agreements, if what you’re buying with them is essential
After the priority debts, it makes sense to pay off the debts with the highest interest rate. A clean slate – wouldn’t that be lovely!
3. Streamline your bank accounts
Most of us have old accounts such as Post Office savings accounts or Building Society accounts which we haven’t used for years. Bite the bullet and search these out. If you think you have an old account but can’t find the details, banks and building societies provide a free service to trace your account.
Close bank accounts that you don’t use. If you still get paper statements, try switching to online statements or get an app for your phone. You will feel so much better without the paper mountain.
4. Cut down on bills
Have you gone through your bank statement recently with a fine-tooth comb? Do you notice any direct debits you don’t recognise? These have a habit of multiplying. There may be several appearing for things you no longer need or enjoy. Magazines, gyms and TV subscriptions are notorious.
Has your New Year’s resolution to go to the gym fallen by the wayside? Why not cancel the membership and go walking instead?
Decluttering is hard work but emotionally and financially rewarding and you could even up with spare cash. Why not conclude your spring cleaning by topping up your ISA with your new found extra cash and feel doubly virtuous?