Time to spring-clean finances

Here comes the sun ... warmer weather is great for prompting action or at least good intentions on the home front. But give a thought for your financial fitness. A few hours spent dusting off or even detoxing your finances every spring can pay off financially.

Dust cobwebs from your mortgage

Jeff Matthews, senior financial adviser at Spicers Wealth Management, says it appears as if interest rates may be on their way up again.

"Variable rates may go to 9 per cent. If you're not on a fixed-rate deal you might want to fix on 7.8 per cent now instead of 8 per cent (or more) later."

Fixing a $100,000 mortgage on 7.8 per cent compared with paying a floating rate of 9 per cent will save you more than $1000 over a year.

Polish the silver

The past year has seen the explosion of high-interest, instant-access bank accounts.

Matthews said in the past banks thought small savers were a pain. But the launch of Superbank's SuperSaver account in 2004 made other banks sit up and look.

Canny savers who take advantage of such deals can get another 4 or 5 per cent on cash in the bank than they receive now.

The SuperSaver account pays 6.7 per cent and the ASB's copycat FastSaver is paying 6.4 per cent.

Vacuum up your debt

In a slowing economy, it doesn't make sense to have credit and store-card debt. If you must have outstanding debt on your cards, you'll often pay 19 per cent interest or more.

If you can't kick the debt habit, then consider consolidating your debts, says Matthews. This can include taking out a personal loan to pay off the credit card debt, which should reduce interest down as low as 12 per cent or extending your mortgage, if you have one, so that you're paying 8 per cent to 9 per cent.

Loans marketed as "debt consolidation loans" may prove expensive thanks to additional charges that are loaded in.

Financial coach Anton Nadilo, of Focus Financial, recommends that debt-laden clients spring-clean their house and sell their clutter. Some have paid off their credit card this way.

Chuck out any junk

Successful investors who make mistakes usually move on pretty quickly.

With the property market and sharemarket on highs, it's time to get rid of those underperforming investments - especially negatively geared properties.

Mortgage rates are going up at the same time as rents are dropping. If your rental property is a lemon now it could come back to bite you should a fall in property values add a third prong to your pain.

As time passes, investors' portfolios often grow in a way that puts one asset class such as property out of balance.

Rebalancing your portfolio regularly is important if you want a healthy spread of risk.

Stock up with your strong dollar

The dollar is unlikely to stay at present levels for the next few years, says Matthews, and now may be the time to send your money on an overseas trip.

"Most people have little money invested overseas," says Matthews. "They should be taking advantage of the strong exchange rate to diversify."

Matthews says few shares on the NZX represent good value, even if they are good companies. Conversely, there are good growth opportunities in Japan and the US to name two countries.

Investors need to keep an eye out for proposed government changes, which could see investments in countries such as Australia, the US and the UK stung with capital gains taxes.

Scrub those bills

If you save nothing and increasing your cashflow by earning more isn't a possibility, then you need to take control of your spending - which, says Nadilo, will put you ahead of 95 per cent of the population.

Step number one is to get your bills under control. Shop around for a better telephone or energy deal. Moving to an alternative telephone provider such as Slingshot may save you money depending on your profile.

You should also resolve to simply spend less by using less power and not calling mobiles or long distance unless essential.

You might want to consider paying your bills by direct debit if you're offered even a small discount for doing so. Do the same if you're inclined to pay late and incur fees.

Deep clean your budget

To be effective, budgets and forecasts need regular cleansing. You can download free budget templates from the Federation of Family Budgeting Services website or Microsoft's Office website.

You may find it useful to buy personal financial software such as Quicken or Microsoft Money that streamline the process of managing your money.

Also good, says Nadilo, is to take complete stock of your financial position and write a net worth statement.

Several financial worksheet packages are on the market.

Disinfect your mind

One of the biggest barriers to successful investment is the mind.

"Most people are in financial denial," says Nadilo. "Some don't even open their credit card bills."

Many investors know what they should be doing, but procrastinate. If that's you, then you might consider getting some coaching or reading a book such as Martin Hawes' Coach Yourself to Wealth.

Don't forget the skirting boards

"Money leaks," says Nadilo. "It's the coffee and muffin at the cafe or the $20 down at the bar."

If there's one sure-fire way to have more money to invest it's to increase your cashflow.

Cutting out a flat white a day will add more than $1000 a year to your net wealth.

Other ways of adding an extra $1000 a year to your balance sheet include ditching the weekly takeaway and taking your lunch to work.

Spending money to impress the neighbours or a boss is a no-no.

"People buy a $3000 suit instead of a $500 one to impress the boss. But the boss doesn't really care," says Nadilo.

The final touches

Finally, don't forget to shop around for insurances to make sure you're still getting the best deal and if your circumstances have changed, it might be worth upping or reducing your life insurance cover.

If you've had children in the last year or you've got money under your belt for the first time, you should make a will. You should also check if you're entitled to family tax credits.

Resolving to educate yourself about your personal finances will have life-long payoffs.