8th September 2021
More than half of UK adults (51%) say that the pandemic has made them more conscious of the need to save more, with over a quarter (26%) saying it has made them recognise that they do not have enough savings, according to a new survey of working adults by WEALTH at work.
With this in mind, WEALTH at work, a leading financial wellbeing and retirement specialist, has prepared the following tips as the basis for strengthening your finances.
1.) Understand your needs and make a plan
Your individual circumstances will mean that you are likely to have different financial priorities depending on your life stage. For some the priority may be saving for a deposit for a first home, whilst for others it might be saving for retirement, or for some it may be paying off debt. Many people simply bury their head in the sand, but knowing what you are saving for and putting a plan in place on how to get there, is a simple but effective way to reach your goals.
Setting up a direct debit is an important step, as if the money is automatically leaving your account each month to pay off debt, or to go into a savings account, it becomes part of your monthly outgoings.
2.) Start with the basics
Many people struggle to understand basic financial issues. A good starting point is to look at where your money goes, everything from utility bills and insurance, to food shopping and going out. Really looking at what you spend can often highlight areas you could cut back on. A great example of this is insurance and utility bills. It is extremely unlikely that you will get a better quote by remaining with your current provider than from shopping around and using tools like comparison sites, but many neglect to do this.
3.) Research your work benefits package
Many employers offer a range of employee benefits from workplace ISAs, to save as you earn schemes, and matching pension contributions. Find out what your employer offers and which are right for you. For example, someone in their 20s can increase their pension pot by 25% by saving just 1% more if their employers were to match this.
4.) Good debt vs bad debt
Another important principle is understanding the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure you have a good deal. 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. It should always be a priority to pay off bad debt. For example, according to MoneyHelper if you borrow £2,000 on a 19% APR and only pay the minimum payment every month, it will take you 24 years and 2 months to repay it and you’ll pay back £4,731 in total. The total interest you would have to repay will be a shocking £2,731!
5.) Emergency fund
In the last year, many people have realised too late the importance of having emergency savings. Ideally, you should have 3-6 months’ of savings that can be accessed at short notice should you or another member of your household lose your job, become ill, or for any unforeseen expense e.g. replacing the boiler or expensive car repairs.
Jonathan Watts-Lay, Director, WEALTH at work, comments;
“Many people don’t recognise the importance of financial resilience until something happens which highlights how vulnerable their finances are. Hopefully the five steps we have outlined will help those who want to take control of their finances and put themselves in a more secure position in the future.”
He continues, “Many employers now offer their staff financial education and guidance including workshops, digital tools and helplines. This can help them understand some of the key issues to help build their financial resilience in the future. Topics can cover a range of financial matters such as debt & money management, managing savings, retirement and health & financial protection. Speak to your employer to find out what support is available.”
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The latest news is brought to you by WEALTH at work*, a specialist provider of financial education and guidance in the workplace.
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