Those ‘wants’ – holidays, home improvements or house move, family events or simply not relying on credit in any form – provide meaning in our lives and are, therefore, a key aspect to what motivates people to perform well at work.
As a result, employers stand to benefit greatly from helping staff achieve those higher desires – and not just their basic needs. One way of doing this is to help their employees plan their finances better so their pay doesn’t run out at the point they’ve covered the basics. Do your managers know what the personal, as well as the career, ambitions are of their team members?
So here are eight simple steps your colleagues can take to make their money go further.
STEP ONE: Set yourself a goal
Deciding you will put £20 a month aside is not a goal – you need to work out why you would want to do that. It’s like going to the gym: this is not, in itself, the goal – the goal is weight loss, strength, better health or fitness. So ask questions like: what do you need to do in the house, where do you want to go on holiday, what do you want from retirement, and when do you want to pay off your debts? Then work out how much that will cost and how much you’d need to save every month to get there in a target timescale.
STEP TWO: Make a budget – and work out what you can do without
Using your incomings and outgoings, create a budget planner to take stock of your finances. If you are spending £6 a day on lunch and coffees, could you make your own for £2.50 a day? That could save over £800 alone each year! Reviewing your utilities could save you another £200. Going to an office or place of work less (now remote working is a thing) could save you a small fortune in fuel and public transport. Review your mortgage – are there cheaper deals? Investigate the benefits at work that could help reduce your food bill, essentials or gym costs. Just 5% off a food shop of £500 a month would trim another £300 a year off your outgoings. As soon as you know you have saved, do something with the money – overpay a loan, put it into a savings account, hide it in the biscuit tin, but DON’T leave it in your account, where it’s at risk of being spent. Think about the last time you got a pay rise – the chances are if you didn’t squirrel it away, you probably didn’t feel any better off within a month or two. To get started, try the Money Advice Service budget planner. It’s a 20 minute task but I guarantee you this is time well spent, not least because writing down a plan significantly increases the chance of you taking further action.
STEP THREE: Use two bank accounts
Many people pay their direct debits from the same account they get paid into. If you have a direct debit coming out two days before the end of the month, it can be impossible to manage. So, get paid into one, and pay the direct debits / bills money into a second account. That way they will always be paid, and you know how much you have left to pay for everything else each month. Even overpay a little into the ‘bills’ bucket to build up an emergency fund for the unexpected.
STEP FOUR: Talk about your situation
In my previous career as a financial adviser, clients would sometimes tell me when we first met that they had no credit card debt or loans. Yet, it often transpired they did have debt but were initially worried about admitting it. It is good to talk, and not opening up can create anxiety in itself. There are often ways to help in these situations, but you cannot do it alone – StepChange, Citizens Advice, or a financial adviser can all help not just to pick you up and show you a way, but also to get your money working harder for you in the long term. Debt is something we all dream of not having, but almost all of us have it in some shape or form, and it’s about minimising it where you can – so don’t fear it, find a way to beat it. Avoid the local expert in the pub or on Facebook too – we all know one! Every situation is different, and working with a real expert can make a world of difference.
STEP FIVE: Reduce your credit limits
Card companies used to increase your credit limit without you even asking. Trim those limits down to remove temptation. Credit cards should be used in emergencies only, if at all. Temptation can be a dangerous friend to have on your shoulder, so de-friend them altogether.
STEP SIX: Freeze your credit cards...literally!
Temptation is often what leads to unnecessary credit card spending so put those cards in a bowl of water and put that bowl in the freezer. You'll only defrost them in a real emergency and you'll have at least an hour to talk yourself out of the impulse – or at least to be sure you want to spend the money. OK, maybe not practical, but if you have to have one, hide it away so it can’t be used for that impulse purchase.
STEP SEVEN: Try to break the debt cycle – by building an emergency fund
Typically, people will have taken a loan out for a white good, a television, a car or a holiday. This increase in outgoings means that gradually an overdraft comes into play, and perhaps a credit card. Eventually, you might take out another loan to consolidate the debt. However, if this new regular payment isn’t manageable then this debt will continue to grow. Make sure your payments are in your control, and that you can put a little aside at the same time where possible. Putting money away for an emergency will help you to lose that reliance on credit.
STEP EIGHT: Reward your good behaviour
Little things like a nice bottle of wine, a takeaway, a day out with the kids etc. can be a real tonic. Nothing big and maybe every month or two maximum. This says “well done” to you and the family and is a reminder of what you are achieving.
Don’t try to conquer the world overnight. We are far more likely to stick at and achieve ‘baby step’ goals than going hard and fast at the outset. Lifting smaller weights often is far more effective for those starting out than reaching for the biggest ones in the gym!
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MyEva is a digital financial wellbeing expert designed to support employees with their financial wellbeing by helping to improve their financial situation with independent personalised guidance and advice.
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