Are You Due a Financial MOT?

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It’s that sinking feeling you have when the engine starts to make mysterious noises. Then you feel performance drop. The dashboard starts lighting up with warning lights and then you realise- your car is due for its MOT. The point of these yearly tests is to make sure that everything is safe and help you try and avoid an unexpected crisis.

The same is true when it comes to your financial health. Just like you do with your car, you need a regular audit of the following factors in order to know the real state of things and avoid trouble:

Check the returns on your savings

When was the last time you checked the interest on your savings accounts? If you can’t answer that, it’s highly likely that you aren’t getting the best deal. At the moment, interest rates are at historic lows – great for homeowners and borrowers, but not so attractive for savers. If you had a great introductory rate that’s run out, don’t be afraid to switch banks to look for a better return. And consider other ways to spread out your portfolio, such as investing in long-term assets or commodities. Find a good financial adviser as the starting point – it’s all about making your money work for you.

Assess trends in your spending

If you aren’t keeping a track of your monthly spending, you should be. It can be as simple as an Excel document, but keeping a regular log can help you to see the bigger picture when it comes to your money. With apps like Wally and Mint you can connect them to your accounts so they monitor your outgoings and categorise them for you. Pull the data together once a year and look for patterns. A bit of detective work will reveal areas where you are overspending and should be cutting back.

Polish up your credit rating

If you have a long-term savings goal, such as purchasing your first home, then you need to make sure your credit rating is in good health, or lenders won’t offer you the best deals. You can request your report online for free, so there’s no excuse. Young people can struggle from a lack of credit history, which can count against you as much as a bad one. So consider taking a loan from direct lenders or a credit builder card and ensure you meet the monthly repayments to build up a good rating ahead of any big credit buy.

Make sure your money isn’t static

Money needs to keep moving in order for you to see real gains. Success isn’t having a large balance in your current account- that’s a sign of financial laziness. Shift things around to make sure your money benefits you best, whether it’s topping up your pension payments or snowballing credit card debt. Keep a few hundred pounds as a cushion, but any excess above this should be moved into savings, used to repay loans or pay back a mortgage early. Make that money work for you and your next finance MOT will be much brighter!