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Simon Brooke is a personal finance journalist and copywriter. He also covers business for a variety of publications.
The new financial year is upon us – and it’s time to make some resolutions. April is also a great time to spring clean your finances and review your pension plans. Here are five easy ways to spruce up your finances ready for the new financial year.
- Make the most of your ISA allowance
Although interest rates are historically low and so cash ISAs in particular might not seem very attractive ISAs are straightforward, flexible and they offer a variety of different options depending on your timescale and risk appetite. You never have to pay tax on the interest you earn and so they’re very attractive from a tax point of view. There’s an additional incentive for the coming financial year. From 7th April you’ll be able to invest up to £20,000 in an ISA – a significant increase on the current amount.
Alongside a cash ISA, a stocks and shares ISA allows you to invest in the stock market, rather than leaving all your funds in cash. Because the stock market goes up and down this means that there’s the potential for far greater returns – as well as greater risk. As always make sure that you balance the investments in your portfolio.
- Review your level of risk
As everyone knows, when it comes to savings, the greater the risk, the greater the return. National Savings and other government backed schemes offer relatively modest returns but then the risk involved here is also very low. At the other end of the scale Venture Capital Trusts and structured products such as guaranteed equity bonds or guaranteed capital plans are considered to be riskier but usually pay a high return.
The level of risk that you’re willing to take and how weighted your investments are towards riskier or safer products depends very much on your age, your goals and your attitude. The new financial year offers a good opportunity to talk to your financial adviser or do some thinking yourself about your risk/return profile.
- Boost your pension
The bad news is that you’re a year older. But the good news is that you can act now to make sure that your retirement is more comfortable by boosting your pension. You could start by thinking about investing a lump sum. Have you got some savings languishing in an account earning very little interest? Do you get an annual bonus that you could use to make a one off payment to your pension fund?
You could also consider setting up a standing order to your pension or, if you already have one, you might want to increase the amount. Even an extra £20 or £30 a month mounts up over the years. Increase your contribution to your company pension fund and you might well find that your employer does the same.
- Pay off your credit card and store card debt
Interest rates might be historically low but personal debt is rising. According to website Moneysupermarket, published in March, borrowing through personal loans, overdrafts and credit cards has risen five per cent this year to an average £6,372.
Borrowing on credit cards and personal loans is particularly expensive and so the new financial year offers a great opportunity to challenge yourself to pay off any outstanding debts here. Even if you can’t pay off a personal loan it might be worth thinking about consolidating it into a mortgage. This will reduce the interest rate but, of course, you’ll still have to pay it off in the long run.
- Make some extra cash
These days earning a bit of extra money to put into your pension, your saving account, an ISA or even to spend on yourself and your family, is easier than ever. If you’ve got a spare room why not let it out via Airbnb? Have a look through your attic and under the stairs for things that you could sell on eBay or Gumtree. When you sell on a website don’t forget to take a good picture and add a bit of story about why you’re putting it up for sale. Research shows that stories can boost eBay prices.
Uber might be the most famous example of the sharing economy but this new model is opening up new opportunities for anyone to earn some extra money. If you’re not using your driveway, for instance, then renting it out could earn you up to around £200 a month, especially if you live in the centre of a large city or by a main railway station or an airport. Electrolux the washing machine maker recently talked about “Uber for laundry,” with owners renting out their machines to neighbours.
From 7th April you’ll be able to claim a tax break of up to £2,000 on money you earn from renting your home on Airbnb or selling items on eBay as the government seeks to help what it calls “micro-entrepreneurs.”