According to the Financial Conduct Authority (FCA)[1], 10.9 million adults in the UK (21%) felt that keeping up with their bills and credit commitments was a heavy burden, which was up 3.1 million compared to the 7.8 million the year previous (15%). The Bank of England has also recently reported that nearly 5 million UK households are facing an average £2,900 increase in their annual mortgage payments.
It’s now more important than ever to support employees to take control of their finances. To help with this, WEALTH at work has outlined below 10 tips to share with employees.
1. Create a budget – The first step to taking control of your finances is to create a budget. Often this may seem like an overwhelming task but becoming clear on your income and expenditure can be a huge help. People should work out what exactly their income is each month and then check their bank statements to clarify what outgoings they have. Outgoings can then be divided into fixed costs which have to be paid such as mortgage, rent, council tax, energy and water, and then those which you may be able to cut back on such as supermarket shopping, monthly contracts for TV, subscriptions and other spending. Some banks have apps which enable this to be done automatically. This will highlight where money is actually going and where savings could be made. Now is the time to get rid of anything that isn’t used or is unaffordable.
2. Track your finances – After creating a budget, it is important to keep track of spending, scheduling regular budget check-ups can provide a complete picture of where someone’s money goes. As time goes by, incomings and outgoings can change so the monthly budget may need tweaking. Reviewing bank and credit card statements can ensure spending habits are aligned with someone’s financial goals and it can help identify areas of overspending so spending can be quickly adjusted.
3. Manage debt – There are many different types of debt with varying rates of interest, and it’s usually a good idea to focus on paying off high interest debts first. Credit cards and overdrafts can have rates of 18% to 40%, with payday loans having rates of 1,500% and more[2]! For example, a debt of £3,000 with a rate of 18% APR could take 10 years and 10 months to pay off if paying £50 a month, with a total interest paid of £3,495. If that monthly payment was increased to £100 a month, the debt would be paid off in three years and four months and interest paid would be only £908.
A good option could be to consolidate any debts into a 0% or low interest balance transfer card, as more money will go towards paying the debt off and enable it to be cleared over a shorter time. Those who are struggling to make a payment should speak to their provider before they miss a payment, as help may be available.
4. Shop wisely – Plan shopping in advance as it will allow time to search for the best deals and reduce expenditure on non-essential items. Also, by switching brands it might be possible to significantly reduce the price of the regular shop. When it comes to big purchases, such as if a washing machine breaks, discount vouchers are often available through voucher and discount websites, and some people also have access to discount schemes through their employer.
5. Save on household bills – It is possible to make significant savings on a range of household bills. Price comparison websites can help to make it easy to compare the different deals available. For example, according to the Association for British Insurers, the average premium for comprehensive motor insurance rose by 21% over the last year. Using a price comparison site could save up to £523[3].
