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19 Jan 2024
by Jonathan Watts-Lay

10 tips to help employees take control of their finances

It’s more important than ever to support employees in taking tighter reins on their money

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A total of 10.9 million adults in the UK (21%) felt that keeping up with their bills and credit commitments was a heavy burden in the six months to January 2023, up 3.1 million compared with the 7.8 million the year before (15%), according to the Financial Conduct Authority (FCA).

The Bank of England has also recently reported that nearly 5 million UK households face 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 finances is to create a budget. Often this may seem overwhelming, but becoming clear on income and spending can be a huge help.

People should work out what exactly their income is each month and check their bank statements to clarify their outgoings. These can be divided into fixed costs that have to be paid such as mortgage, rent, council tax, energy and water, and 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 that can do this automatically. This will highlight where money is going and where savings could be made.

2. Track finances

After creating a budget, it is important to keep track of spending, and scheduling regular budget check-ups can provide a complete picture of where the money goes. 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 financial goals and can help identify areas of overspending that need adjusting.

3. Manage debt

There are many different types of debt with varying rates of interest, and it’s usually best 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 even more. 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.

4. Shop wisely

Plan shopping in advance as it will allow time to search for the best deals and reduce spending on non-essential items. Switching brands might significantly reduce the price of the regular shop. When it comes to big purchases such as a washing machine, 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 deals. According to the Association of British Insurers, the average premium for comprehensive motor insurance rose by 21% over the last year.

6. Avoid auto-renewals

Many insurance policies automatically renew each year but people may be paying more than they need to. Find out when any contracts are due to end and put it in the diary a month earlier, so there is plenty of time to shop around.

7. Automate saving

Individuals could consider setting up automatic savings transfers which round up transactions to save small amounts, which can really add up. For example, if you buy something for £4.20, the bank rounds it up to £5 and 80p goes into your savings. However, for those who can afford to save, it is often a good idea to set up a direct debit for saving into an ISA or even a company share scheme if available. Many employers offer payroll-deducted savings schemes.

8. Start saving early

Starting to save when you are younger into ISAs and a pension means that the money has lots of time to grow. Many people already pay 5% of their salary into their workplace pension through auto-enrolment, with an additional 3% employer contribution. Some employers will match additional contributions. For those in their 20s, by saving an extra 1% a year with an employer matching this, it is possible to increase a pension pot in retirement by 25%.

9. Beware of scams

Scammers can sound completely legitimate – 300,000 victims report a case to Action Fraud every year in the UK. The Home Office estimates the cost of fraud against individuals at £4.7bn. It’s vital to check whether a company is registered with the FCA. Also visit the FCA’s ScamSmart website, which includes a warning list of companies operating without authorisation or running scams.

10. Take action

People struggling with repayments should speak to their lenders and Citizens Advice can help explain how to deal with debts. Many employers offer staff help through financial education and guidance and offer ways to cut costs and boost savings.

Jonathan Watts-Lay, Director, WEALTH at work, says: “Now is a great time for employees to review their financial situation and take action to make sure they are in control of their finances in 2024.

“Proactive employers are actively working to help employees improve their financial future, remove the stigma around money worries and access the support available. Key to this is offering financial education and guidance to help employees better manage their finances including how to create a budget, build savings and manage debt.

“Supporting employees to build their financial resilience and improve their financial wellbeing is of utmost importance right now.”

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