After the excesses of the festive period, many people see the New Year as a good time to review their finances and get spending back under control.
Financial wellbeing and education provider Wealth at Work has created 10 tips that HR, reward and benefits professionals can share with employees to support them.
1. Create a budget
The first step to reducing costs is to create a budget. People should work out what exactly their income is each month and then check their bank statements to clarify what money is going out.
These outgoings can be divided into fixed costs that have to be paid and things people might be able to cut back. Fixed payments could include a mortgage or rent, council tax, energy and water. Areas of spending where people could cut back might look like supermarket shopping, monthly contracts for TV or subscriptions.
Some banks have apps that can help do this for you. They 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. Ditching takeaways, taking lunch to work and learning to budget can make a huge difference. For example, the average household in the UK spends £1,278 on eating via takeaways and restaurants each year. There are many free budgeting apps available which will help to track spending on groceries, meals out and entertainment.
3. Shop wisely
Plan shopping in advance because this gives you time to search for the best deals and reduce expenditure on non-essential items. Switching brands can help significantly reduce the price of your regular shop. Someone who usually spends £60 a week, could save £20 by changing supermarkets, representing an estimated saving of £1,040 a year, while a couple or family could save even more.
When it comes to big purchases, such as a washing machine, discount vouchers are often available through voucher and discount websites and many workplaces offer employee discount schemes (also see tip 10). When shopping for a particular product, Idealo finds the best price online for a particular product and the free website ‘CamelCamelCamel’ allows you to track the price of Amazon products. Consider installing browser extensions like Honey that search for discount codes during online check-out.
4. Save on household bills
It is possible to make significant savings on a range of household bills from car and home insurance to phone, broadband, TV and mobile contracts. Comparison websites can help to make it easy to compare the different deals available. Changing to a SIM card only deal on your mobile once you’re out of contract could save £352 a year. Plus, changing broadband providers could save £163 a year.
5. Avoid auto-renewals
Many insurance policies automatically renew each year so many people may be paying more than they need to if they don’t shop around. 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 that there is plenty of time to shop around. For example, using a price comparison site could save up to £462 on car insurance, so £920 for a two-car household.
6. Manage debt
It’s important to understand the difference between good debt and bad debt.
For example, a mortgage is a form of good debt, which should be reviewed occasionally to ensure you have a good deal.
However, at the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. For example, a debt of £3,000 with a rate of 18 percent 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.
For anyone struggling with debt, a good option could be to consolidate any debts into a zero percent 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.
7. Create emergency savings
Having money put aside for emergencies can reduce reliance on debt for unexpected costs such as car repairs, house maintenance or a reduction in household income. As a general rule it’s a good idea to aim for an emergency fund that can cover several months of bills. Work out if you can afford to put some money aside each month, and remember, even small amounts can add up.
Setting up a regular transfer to a savings account can be a useful way of separating this money from your regular expenditure. Money Helper offers a savings calculator to help determine how long it will take to reach a savings goal: https://www.moneyhelper.org.uk/en/savings/how-to-save/savings-calculator
8. Beware of energy costs
Make sure you do all you can to be energy efficient. Small changes such as turning off lights when they aren’t needed, washing clothes at 30 degrees instead of higher temperatures, making sure the dishwasher is only used when full, and cutting down on the number of times the kettle is boiled can add up to really make a difference to energy bills. Just switching all appliances off standby mode can save £45 a year.
9. Make the most of pensions
Pensions can be one of the most valuable ways of saving for the future. Currently, employers are required to make a 3 percent minimum contribution with employees required to pay 5 percent to bring the total pension contribution to 8 percent.
People with pensions should check the contributions they are making and consider whether they can afford to increase them. Depending on the arrangement an employer has in place, some will match any additional contributions which can make a big difference. For example, an additional 1 percent saved each year into a pension, matched by an employer, can increase a pension pot by 25 percent in retirement.
10. Maximise workplace benefits
Most employers offer perks such as discount schemes with major retailers on groceries, dining and electrical goods. Know what is on offer and how to access it.
Many employers also offer financial education and guidance through the workplace to help people with a full range of money matters, as well as providing access to savings vehicles such as ISAs and Share Plans to help build financial resilience.
Jonathan Watts Lay, director at Wealth at work, said: “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 2025.
“Proactive employers are actively working to help employees to improve their financial future, remove the stigma around money worries and utilise the support available. This includes providing financial education and guidance through financial coaches, as well as access to savings vehicles such as Workplace ISAs or Share Plans to build financial resilience.
“This can make a huge difference by giving people the opportunity to understand their finances, including ways to save money, learn about budgeting, manage debt, and how to boost savings and prepare for retirement. Afterall, when employees feel in control of their finances, overall wellbeing is improved which in turn can lead to increased productivity and less absenteeism in the workplace.”
