With increasing costs continually putting pressure on household finances, 2023 is set to be a financially challenging year for many. It’s therefore now more important than ever to support employees to take control of their finances to successfully navigate the cost-of-living crisis.
To help, WEALTH at work, a leading financial wellbeing and retirement specialist, shares its money management tips to help employees budget, save and stay on top of their finances throughout 2023.
1. Create a budget
The first step is to create a budget, for some this may seem like a daunting task but getting an overview of your income and outgoings can really help.
Firstly, employees should check their bank statements to determine their monthly income and then what outgoings they have. Next, making a list of these monthly outgoings i.e. mortgages or rent, energy bills, debt, car insurance, eating out and groceries, regular subscriptions etc, will highlight where their money is going and what savings could be made. Next, any unused subscriptions and memberships that may have been forgotten about should be cancelled.
2. Make managing debt a priority
There are many different types of debt with varying rates of interest. Credit cards and overdrafts can have rates of 18% to 40%, with payday loans having rates of 1,500% and more!
It is often a good idea to make paying off expensive debts a priority. 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 the interest paid would be only £908.
For individuals with credit card debt, it’s possible that they could be paying more interest on the payments than they need to. By shopping around they may be able to move to a lower interest rate, or ideally to a card which offers 0% on balance transfers. If a person has multiple debts, it could also be a good option to consolidate these into a 0% or low-interest balance transfer card, as more money will go towards paying the debt off and enable them to clear it over a shorter period.
3. Track your finances
After creating a budget, it is important for employees to keep track of their money, scheduling regular budget check-ups can provide them with a complete picture of where their money goes. As time goes by, incomings and outgoings can change so they may need to tweak their budget. Reviewing their bank and credit card statements will ensure their spending habits are aligned with their financial goals. If not, they will discover areas where they may be overspending and can quickly adjust.
4. Be a savvy shopper
There are several steps that can be taken to help significantly reduce the price of purchases. For the weekly shop, planning a shopping list in advance will allow time to search for the best deals and reduce expenditure on non-essential items. Switching brands can also reduce costs. Supermarkets separate their products into various categories from ‘Luxury’ to ‘Value’, whilst the ‘Luxury’ product packaging is often more opulent the actual product is very similar to the ‘Value’ range. Downshifting can typically cut grocery bills by 30% so for a person who normally spends £60 a week on food, this could be cut down to roughly £40. That’s a saving of £1040 a year.
It’s a good idea for individuals to look at what discounts are available to them as this could save them money on a range of purchases. Discount vouchers are often available through voucher and discount websites and many workplaces offer employee discount schemes with major retailers. 5 or 10% off a shopping bill can make a huge difference, especially for big purchases such as replacing a broken washing machine.
5. Save on household bills and auto-renewals
Changes in the energy industry mean that it’s unlikely that consumers will find good deals on energy costs at the moment. For those unable to find a better tariff than the one they’re on it’s probably better to wait until deals are available again before switching suppliers. But there are still significant savings available on other bills.
Many policies for car, home and travel insurance automatically renew each year, however, sometimes individuals are paying more than they need to if they allow this to happen. To ensure they get the best deal and avoid any potential price hikes, it is important for employees to be proactive by finding out when their contract is due to end and making a note in their diary for a few weeks earlier. This will ensure they have plenty of time to shop around or negotiate where appropriate. For the best deal price comparison websites are a quick and easy tool to help compare available offers and help you save.
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