FOOL'S EYE VIEW
Five Ways To Simplify Your Finances

By Alison Hunt (TMFAlly)
August 16, 2005

If you're the kind of person who barely looks at their bank and credit card statements each month, preferring to put them in a pile to be "filed", then you're not alone. Many of us are guilty of avoiding dealing with anything financially related unless we absolutely have to as it's regarded as a time-consuming chore.

However, The One Account believes that there may be a reason why some of us are happier to take control of our finances than others. A recent study by mortgage provider has found that 40% of left handed people claim to be "very financially aware" and will regularly shop around for the best financial products. However, only one in three (34%) of right handed people would make the same claim. Additionally, 47% of left handed people asked regularly check the best buy tables on the internet, compared to 39% of right handed people.

Well, regardless of whether you're left or right handed, we can all take charge of our finances. It doesn't take long and, once organised you will find things simply tick along, needing very little effort on your part. So why not give it a go and follow these five tips?

1. Savings

One of our main bug bears regarding our finances is having too many accounts and products to keep an eye on. Having to remember the different security information and passwords for numerous accounts can make our lives very difficult and keeping track of all the corresponding paperwork can be a real headache. Of course, this would be all worthwhile if we had a vast amount of savings. Unfortunately, however, many of us have numerous savings accounts but they each have very small sums inside them!

One way that we can simplify our savings is to find a good account paying a high rate of interest and squirrel all of our spare cash into it. By closing down any other accounts and concentrating on just one high-payer, we will undoubtedly earn more interest. However, importantly we will have made our lives simpler - we can concentrate on just one account instead of many and when it falls out of the best buy tables, we can ruthlessly move our cash to another best buy.

With online banking, opening and transferring funds is easy so we should all be earning as much interest as possible. Here are the current market leading savings accounts:

Top Savings Accounts

Provider	Account	Rate/AER	Min. deposit	Extras/Conditions
ICICI Bank Apply via the Fool	HiSAVE	5.40%	£1	-
AA	Internet savings 2	5.11%	£1	Inc. first year 0.5% bonus
First Direct Apply via the Fool	e-savings	5.00%	£1	No interest paid in any month a withdrawal is made
Yorkshire BS	Internet savings	5.00%	£1	Rate guaranteed to be no less than Base rate (28/2/07)
Sainsbury's Bank	Internet saver	5.00%	£1	Rate guaranteed to be better than market average (31/12/10)

Check out the best rate that your savings are earning and if it's not good enough, move to one of these best buys. And while you're at it, why not find a better bank account, too?

Find a top paying Savings account in our Savings Centre.

2. Tax-free Savings

Do you have savings in a number of mini-cash ISA accounts? We are each entitled to either invest up to £7,000 each year into maxi-shares ISA, or save up to £3,000 into a mini-cash ISA and £4,000 into mini-shares ISA, each year, tax free (you must be 16 or over to open a mini-cash ISA, and 18 or over to open a shares ISA). All taxpayers (especially those who pay the higher rate) should consider making the most of their mini-cash ISA allowance as it is one of the few ways we can save without paying tax. However, opening a new cash ISA each year can be a bit of a nuisance as it's easy to lose track of how much is saved in each. One way to simplify this is to use the transfer facility available with many mini-cash ISAs and transfer them all into one account. See the following table for the current, market leading mini-cash ISA rates.

Top Mini-Cash ISA Accounts (with no penalties for transfers in/out)

Provider	Account	Rate /AER	Min. deposit	Extras/Conditions	Operated via
First Direct	e-ISA	5.50%	£1	Fixed until 15/2/06. Upper limit of £10,000 (including 2005 allowance) for previous ISAs transferred in.	Internet
Halifax	ISA Saver Direct	5.15%	£1	-	Internet/Phone/Branch
Kent Reliance BS	Mini-cash ISA	5.11%	£1	Interest paid will be no lower than 2% below the Base rate	Branch/Post
National Counties BS	Cash Mini-ISA	5.10%	£1	-	Phone/Branch /Post
Leek United BS	Mini-cash ISA	5.00%	£10	Rate guaranteed to be no lower than base rate	Internet

So check the rate your best mini-cash ISA is earning and if it's more than one or two percent below the rates given in this table consider moving to one of these best buys. If you then transfer any other ISAs to the same account you will have just one ISA to keep track of. And if you've never saved into a cash ISA before (and you won't be investing more than £4,000 this year) consider opening an account to maximise your interest.

3. Learn to budget

Once your savings are organised, it's worth setting up a budget to help everything tick along. We in the UK are guilty of spending more than we earn and creating and sticking to a budget can help prevent this from happening. What's more, it's easy. Simply grab a piece of paper (or create a spreadsheet) and list your income and your outgoings (this Statement of Affairs calculator can prevent you from missing anything).

Whatever is left over (after ensuring you've allocated a little something for socialising etc) is available to be saved and by setting up a standing order this money can be swept into your savings account on the day you are paid, leaving no time for it to be missed. If however, you find you have no money left over after your outgoings, you know that some drastic money-saving measures must be undertaken. Additionally, you may find a second job can provide essential income. You'll be surprised at how quickly that savings account balance will grow. However, if you are currently paying off expensive credit card balances or loans you should attack these first; why not use the snowballing technique?

So set up your budget without delay. You'll find that once you've stuck to it for a few months you will feel extremely pleased with yourself and it will only take a quick peek at the balance of your savings account to keep you motivated!

4. Don't pay for too much cover

I recently discussed the merits of packaged bank accounts with a colleague as he currently pays £9.50 each month for his packaged bank account which he's been quite happy with. However, on explaining the benefits of the account he realised that he had overlooked its free travel insurance and roadside recovery features and was continuing to pay for separate cover. Paying too much for insurance is something many of us are guilty of as it's all too easy to forget about the cover we receive for free. If you'd taken out an Egg household policy a few months ago, for example, you would have received a free travel insurance policy. But many policyholders will have forgotten this by the time they book their trip and will still pay their travel agent for cover for their two weeks in the sun. And how many of us are paying for huge amounts of life cover when our companies provide a large chunk of cover, for free?

One way that we can simplify and keep track of all of those insurance policies whilst checking we don't have too much cover, is to create a spreadsheet and update it each year. Not only can this form a quick referral point for the future, it can also warn of your renewal dates and allow you to plan your finances around them.

5. Retirement Funds

If you thought savings and insurance needed simplification, you'll find retirement savings will top the lot. Due to the fact we all tend to move jobs much more regularly these days, even a 30-year old could have three or four different pension pots floating about. And with different firms providing different types of pension (money purchase, final salary etc) we can find ourselves saddled with a bewildering array of statements each year. What's more, your old company may even change pension provider, which can prove extremely confusing when you receive statements from a company you've never dealt with. And if you've moved house a few times you may not be receiving anything at all!

Simplifying pensions is unfortunately not an easy task. If your current pension provider has low fees and you have a series of other very small pension pots floating around you may wish to combine them together either into your current pension, or in a personal stakeholder pension. However, you need to take into account any charges that will be incurred. You may find it worthwhile to give your current pension provider a call, although you will probably find it unwilling to give advice, suggesting you seek professional help instead (which may be a good idea). If you have previous pensions that you have lost track of, the Government's Pension Tracing Service should be able to help.

Find out more about Pensions in our Pension Centre.

So why not try simplifying your money by following these tips? It can be worth it for the reduction in paperwork alone!