Six ways to clean up your finances

Last updated: Mar 24th, 2014
Feature by Nathalie Bonney

1. Write a budget and stick to it

Living within your means makes common sense but with so many outgoings it's not always easy to know where all your money is going. So the first thing to do is work out how much you spend a month and see if this is more than your total monthly income. It's then a case of juggling round the figures – seeing if there are certain things you can spend less on to cover other areas.

2. See where you can cut out spending

It may be that you are spending more than you're earning. While painful, the good thing about seeing what you spend on paper is that it can shock you into making changes - there's no room for complacency. It could just be simple things like cutting out on takeaways and bringing in packed lunches to work. Or you may need a more serious overhaul of your finances.

15 ways to save money

3. Make the switch

Changing energy providers, getting a competitive mortgage deal and switching broadband services are all ways of saving money on your bills.

Compare energy prices and switch provider

4. Maximise your savings

It's important to build up rainy day savings in case you suddenly find yourself out of work or faced with an unexpected bill. You should aim to build up savings of at least three months salary, ideally six. Work out how much you can afford to save each month and ask your bank to move the money the day after pay day to ensure you don't spend it.

Always make use of your annual cash ISA allowance first, which currently is £5,940, as any interest earned on this is tax–free.

Also see if your current account offers a regular savings account. These accounts are usually only available to existing customers and offer high interest rates in return for monthly contributions. These are a great way of building the savings discipline but they do usually only last a year so you'll have to seek out a better account then.

5. Do you need to switch credit cards?

While credit cards are indisputably handy, use the wrong card and it could cost you a lot. In an ideal world transfer existing credit card debt onto a 0% balance transfer card and be sure to do so again at the end of the 0% period, or pay off the debt of course. Also try to pay off more than the minimum each month as this will reduce the amount of interest you pay dramatically.

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6. Pay to save

Cheapest isn't always best, especially when it comes to insurance and protection policies. It's more important to get the correct level of cover than bag the cheapest deal. Also don't be tempted to cut back on certain financial products - for example if you have a family it's essential that you have life insurance to cover your dependents.

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