Liam Croke: five financial areas for you to focus on this year

As promised last week, I have a further five areas that I want you to consider implementing in the days and weeks ahead.

As promised last week, I have a further five areas that I want you to consider implementing in the days and weeks ahead.

These are what I call my back-to-basics tips and if you work on just one or two of them at a time, they will, I assure you, make a lasting improvement on your finances.

Track your spending

A budget is a conscious way of you deciding how you are going to spend your money. Having one will make you make better financial decisions.

Your money comes in and goes out whether you track it or not. But understanding the flow of money in and out of your account is essential if you want to take back control of your finances in 2015.

After you review where your money is going, you will clearly be able to identify the areas where you are spending too much which will allow you to then reprioritise your expenses. This is how you make room for money required for other areas i.e. savings.

It’s a bit like trying to lose weight. What is the first thing you do when you want to lose weight? You weigh yourself, that is your starting point and then you set yourself a goal that you want to lose, for example, 6lbs in the next month. Then you go about eating less and exercising more.

The same principles apply with your finances - you have to have a starting point, so weighing yourself financially is knowing how much you are spending on different things over the course of one month.

And yes it can be a pain in the ass writing down what you spend your money on, but if you don’t know what you are up against, you will have no idea what areas you need to improve.

Any time I ask clients of mine to carry out this exercise, all of them almost always agree that it was a very worthwhile experience and I often hear comments like “I didn’t realise I was spending that much on” or “I didn’t realise I had to be paying as much as I was.”

If you want me to email you the monthly budgeting tracker I use, just send me your email address.

Pick a better bank

Stop complaining about your existing bank and the quarterly charges they keep applying to your account.

They won’t go way so you either do one of two things. You either switch to a bank who is offering free banking subject to certain conditions or stay with your existing bank but deposit the minimum amount required each month along with keeping the balance at all times above the minimum amount they insist on – that way they can’t apply fees and charges to your account.

I was talking to a friend of mine earlier last year who had a current account with one of the pillar banks and he was always complaining about his quarterly fees.

Over one year, the bank was charging him about €178. He had two choices to avoid paying this amount – he could either switch his bank to another one who was offering no fees provided he lodged €1,500 per month with them or he could stay with his existing bank and as long as he kept a minimum balance of €2,500 in it all times during the month, he would avoid having to pay them anything.

He had about €5,000 sitting in the same bank as his current account was in and it was earning 0.5% in interest, so the net interest he was earning on this amount was €15.

If he transferred half of it over to his current account, it would mean he would avoid having to pay any fees and in effect his return would be €178 over the course of one year – that’s a 6% gross return.

Plan ahead for big-ticket purchases

Any purchases like buying a car or going on holiday can be greatly reduced if you save well in advance.

So if you are thinking of buying anything or spending money that will require a big cash outlay, waiting to buy them until you have the cash in place or at least being able to put more money towards the cost can help lower monthly repayments and help prevent financial stress at a later date.

Review insurance policies

When it comes to shopping for clothes, cars, holidays and so on, you are always looking out for the best prices you can get, so why not do the same with car, life, home and health insurance?

You are almost certainly paying more than you need to be in at least one of these areas so get on line and comparison shop, you could save yourself a lot.

The bonus to reducing monthly bills is that you save them 12 times over the course of a year by taking a single action.

Create a good filing system

Having all of your financial paperwork in one place is important in my opinion.

If someone is well organised and they know where a particular financial statement is kept for example, that tells me a lot about their finances. It also tells me a lot about those who have no clue.

Every year, I get a new folder and mark on the side of it “Financial Docs” and alongside it, I write the year ahead i.e. 2015.

I don’t use last year’s folders because I want simplicity, I don’t want to be looking at dates on statements to find a particular transaction.

If I am looking for something that was billed to me in 2014, I go to that folder and I can find it very quickly.

And I have tabs in each folder for current account statements, home insurance renewals, health insurance, visa statements, mortgage, pension and savings statements and so on.

Whenever I meet new clients, I might ask them to provide me with, for example, their latest mortgage statement or their last annual pension statement. It is very rare, to be honest, that someone can put their hands on them quickly.

They almost always have to request copies, which causes delays and can cost them money as well (a bank will charge you per page when requesting duplicate statements) so just get organised this year and buy yourself a decent file. Every time you get any sort of correspondence relating to your finances, put it into it.