It’s now more important than ever to commit to organising your financial affairs. WEALTH at work, a leading financial wellbeing and retirement specialist, has run financial education workshops for staff in hundreds of organisations. WEALTH at work, outlines below top tips to help people take control of their finances in 2024.
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! 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.
6. Avoid auto-renewals – Many insurance policies automatically renew each year but people may be paying more than they need to. It’s a good idea 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. Two transactions like this per day could help save £584 over a year*. 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 for effortless saving.
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 (up to certain limits). In fact, 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 tend to sound completely legitimate when they contact you. It’s easy to see why so many people are fooled and it isn’t small amounts of money which are being taken. 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 £4.7 billion. If someone contacts you with an offer which seems too good to be true, it’s vital to check whether the company is registered with the FCA. Individuals can also visit the FCA’s ScamSmart website which includes a warning list of companies operating without authorisation or running scams.
10. Take action – There is help available. Individuals should speak to lenders to see if they can help if they are struggling with repayments and Citizens Advice can help people understand how to deal with any debts. Many employers offer their staff help through financial education and guidance and offer ways to cut costs and boost savings.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “Now is a great time to commit to understanding your financial situation and take action to make sure you are in control of your finances in 2024. There is help available if you are struggling to pay off your debts, pay day to day bills or finding it difficult to save.”
He adds; “Proactive employers are actively working to help those in the workplace to improve their financial future, remove the stigma around money worries and access the support available. So, it’s always worth speaking to them to see what help they offer.”
*Two transactions like this per day could help you save £584 over a year – 80p x 2 = £1.60 – £1.60 x 365 = £584