As the year 2024 comes to a close, it is the perfect opportunity for individuals to reflect on their financial situation and set new goals for the upcoming year. Circumstances affecting finances can change considerably over time, making it important to regularly review personal financial plans. To assist with this, WEALTH at work has compiled ten practical tips to help employees take control of their finances in 2025.
1. Create a Budget
The foundation of financial management starts with budgeting. Begin by identifying your monthly income and reviewing bank statements to understand your expenses. Divide expenses into fixed costs—like rent, mortgage, utilities, and taxes—and flexible costs, such as groceries, entertainment, and subscriptions. Many banks provide apps that help automate this process, making it easier to pinpoint areas where savings are possible.
2. Track Your Spending
After setting a budget, keep an eye on your daily spending habits. Small changes, like preparing meals at home instead of dining out, can lead to significant savings. For example, the average UK household spends £1,278 annually on eating out. Free budgeting apps can help monitor spending across categories like groceries, dining, and entertainment.
3. Shop Strategically
Plan purchases in advance to take advantage of discounts and deals. Switching supermarkets or brands can yield substantial savings. For instance, reducing a £60 weekly grocery bill by £20 could save £1,040 annually. When making larger purchases, such as home appliances, explore discount websites or employee discount programs for better deals. Tools like Honey, Idealo, and CamelCamelCamel can help find the best prices online.
4. Cut Down on Household Bills
Reviewing contracts for services such as insurance, broadband, and mobile plans can lead to substantial savings. Using comparison websites makes it easy to find better deals. For example, switching to a SIM-only mobile plan after your contract ends can save up to £352 annually, while changing broadband providers might save £163 per year.
5. Avoid Automatic Renewals
Many insurance policies and service contracts automatically renew, potentially leading to higher costs. Mark renewal dates on your calendar and start shopping for better deals a month before the contract ends. Price comparison tools can save hundreds on insurance and other recurring expenses.
6. Manage Debt Wisely
Understanding the difference between good and bad debt is crucial. Mortgages, often considered good debt, should be periodically reviewed for better terms. On the other hand, high-interest debts like payday loans and credit card balances should be addressed quickly. For example, increasing monthly payments on a £3,000 debt at 18% APR from £50 to £100 reduces the repayment period from nearly 11 years to just over three years, cutting interest costs significantly. Consolidating debt with a 0% balance transfer card may also help.
7. Build Emergency Savings
Having an emergency fund can prevent reliance on debt for unexpected expenses like car repairs or job loss. Aim to save enough to cover several months’ worth of expenses. Even small, regular contributions to a savings account can add up over time. Online tools like MoneyHelper’s savings calculator can help set realistic goals.
8. Reduce Energy Costs
Energy efficiency can lead to noticeable savings. Simple actions, such as turning off unused lights, washing clothes at lower temperatures, and unplugging devices, can reduce bills. For instance, turning off appliances rather than leaving them on standby can save £45 annually.
9. Maximize Pension Contributions
Pensions remain one of the best ways to save for the future. Employers in the UK must contribute at least 3% to workplace pensions, with employees adding 5%. Review your contributions and consider increasing them if feasible. Some employers match additional contributions, significantly boosting retirement savings. An extra 1% annually, matched by an employer, could increase retirement savings by 25%.
10. Take Advantage of Workplace Benefits
Many employers offer benefits beyond pensions, including discounts on groceries, dining, and electronics. Some also provide access to financial education, guidance, and savings programs like ISAs and Share Plans. These resources can help employees save money, manage debt, and plan for the future effectively.
Supporting Employees’ Financial Wellbeing
This is a great time for employees to reassess their finances and make proactive changes for the year ahead. Forward-thinking employers are stepping up by offering financial education, access to savings tools, and support for building financial resilience. These initiatives not only improve employees’ financial confidence and wellbeing but can also enhance workplace productivity and reduce absenteeism. When employees feel financially secure, everyone benefits.
