taking control of your finances in 2023.

With increasing costs continually putting pressure on household finances, 2023 is set to be a financially challenging year for many. It’s therefore now more important than ever to take control of your finances to successfully navigate the cost-of-living crisis.

To help, WEALTH at work, a leading financial wellbeing and retirement specialist, shares its money management tips to help you budget, save and stay on top of your finances throughout 2023.

1. Create a budget

The first step to taking control of your finances is to create a budget. This may seem like a daunting task but getting an overview of your income and outgoings can really help.

Firstly, check your bank statements to determine your monthly income and  what outgoings you have. Then, make a list of these monthly outgoings i.e. mortgages or rent, energy bills, debt, car insurance, eating out and groceries, regular subscriptions etc. This will highlight where your money is going and where savings could be made. Next, cancel any unused subscriptions and memberships you have forgotten about – if you can’t afford them or don’t use them, now is the time to cancel!

2. Make managing debt a priority

There are many different types of debt with varying rates of interest. Credit cards and overdrafts can have rates of 18% to 40%, with payday loans having rates of 1,500% and more!

It is often a good idea to make paying off expensive debts a priority. 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 the interest paid would be only £908.

If you have credit card debt, it’s possible that you could be paying more interest on the payments than you need to. By shopping around you may be able to move to a lower interest rate, or ideally to a card which offers 0% on balance transfers. If you have multiple debts, it could also be a good option to consolidate these into a 0% or low-interest balance transfer card, as more money will go towards paying the debt off and enable you to clear it over a shorter period.

3. Track your finances

After you have created a budget it is important to keep track of your money. Scheduling regular budget check-ups will provide you with a complete picture of where your money goes. As time goes by, incomings and outgoings can change so you may need to tweak your budget. Reviewing your bank and credit card statements will ensure your spending habits are aligned with your financial goals. If not, you will discover areas where you may be overspending and can quickly adjust.

4. Be a savvy shopper

There are several steps you can take to help significantly reduce the price of your purchases.  For the weekly shop, planning your shopping list in advance will allow you time to search for the best deals and reduce expenditure on non-essential items. Switching brands can also reduce costs. Supermarkets separate their products into various categories from ‘Luxury’ to ‘Value’, whilst the ‘Luxury’ product packaging is often more opulent the actual product is very similar to the ‘Value’ range.  Downshifting can typically cut grocery bills by 30% so for a person who normally spends £60 a week on food, this could be cut down to roughly £40. That’s a saving of £1040 a year.

It’s a good idea to take a look at what discounts are available to you as they could help you save money on a range of purchases. Discount vouchers are often available through voucher and discount websites and many workplaces offer employee discount schemes with major retailers. 5 or 10% off your shop can make a huge difference, especially for big purchases such as if you need to replace a broken washing machine.

5. Save on household bills and auto-renewals

Changes in the energy industry mean that it’s unlikely you will find many good deals on energy costs at the moment. If you don’t find a better tariff than the one you’re on it’s probably better to wait until deals are available again before switching suppliers.  But there are still significant savings available on other bills.

Many policies for car, home and travel insurance automatically renew each year, however, you may be paying more than you need to if you allow this to happen. To ensure you get the best deal and avoid any potential price hikes, find out when your contract is due to end and make a note in your diary for a few weeks earlier. This will ensure you have plenty of time to shop around or negotiate where appropriate. For the best deal, look online at price comparison websites, they are a quick and easy tool to help compare available offers and help you save.

6. Look for other income streams

You may want to consider if there are other ways you can supplement your income. Is it possible to rent out a room, or take on extra jobs such as babysitting, dog walking, or freelancing? Creating multiple income streams can increase financial security, help you tackle debt and add to your savings each month.

7. Build an emergency fund for the future

It is a good idea to have an emergency fund to use if you lose your job, are unable to work or for unexpected costs. Try to aim for 3-6 months of your salary if possible. Cash ISAs could be a great way to start saving whilst offering easy access to your savings should you need them. It is often a good idea to set up a standing order for saving rather than waiting to see what is left at the end of the month. This way you see saving as something you have decided to do, rather than something that is optional.  It may also be worth speaking to your workplace to see what saving vehicles they offer to help you achieve your goals

8. Start saving early

Starting to save as soon as possible means that the money has time to grow. It is also important to make sure that you’re saving into your pension from early on. Many are already paying 5% of their salary into their workplace pension through auto-enrolment, with an additional 3% employer contribution. However, we know that many employers match additional contributions (up to certain limits). In fact, if you are in your 20s, by saving an extra 1% a year with your employer matching this, it is possible to increase the amount you have in your pension in retirement by 25%.

9. Don’t neglect your pension

If you are in financial difficulty, it may be tempting to try and save money by reducing or pausing your pension contributions. However, think carefully before doing this because opting out of your pension will have a huge impact on the amount you have to live on when you retire, and really has to be an absolute last resort. Also, if you can afford to continue making regular contributions during the present market downturn, more positive long-term growth may be generated.

10. Beware of scams

Scammers tend to sound and look completely legitimate and it’s easy to see why so many people are fooled. In fact, almost a quarter (22%) of UK adults reported being approached by scammers offering free pension advice or a free pension review, investment opportunities, or a tax refund between March and May 2022. 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 Financial Conduct Authority (FCA). You can also visit the FCA’s ScamSmart website which includes a warning list of companies operating without authorisation or running scams.

Jonathan Watts-Lay, Director, WEALTH at work, comments; “Now is a great time to work out what your financial situation really is, and take action to make sure you are in control of your finances in 2023. When making a financial plan for the year ahead, don’t worry if you don’t know where to start as there is plenty of help available.”

He adds; “For those who are worried about debt, it’s always worth speaking to lenders to see if they can help if you are struggling with repayments and Citizens Advice can help you understand how to deal with any debts.”

Watts-Lay explains; “Don’t forget that many employers offer their staff help through financial education and guidance, as well as other benefits such as discount vouchers, so make sure you speak to them to find out what is available.”

6. Look for other income streams

Employees may want to consider if there are other ways they can supplement their income. Is it possible to rent out a room, or take on extra jobs such as babysitting, dog walking, or freelancing? Creating multiple income streams can increase financial security, help someone tackle debt and add to their savings each month.

7. Build an emergency fund for the future

It is a good idea for individuals to have an emergency fund to use if they encounter unexpected costs. They should try to aim for 3-6 months of their salary if possible and it is often a good idea to set up a standing order for saving rather than waiting to see what is left at the end of the month. Cash ISAs could be a great way to start saving whilst offering easy access to savings. Employees will also need to understand how the various workplace saving vehicles available, such as workplace ISAs and Share plans, can help them to achieve their savings goals.

8. Start saving early

Starting to save as soon as possible means that money has time to grow. It is important that employees understand the importance of saving into their pension from early on. Also, we know that many employers match additional contributions (up to certain limits), but it’s important that this is understood. For example, they may not realise that someone in their 20s can increase their pension pot by 25% in retirement by saving an extra 1% a year with an employer match.

9. Don’t neglect your pension

For those in financial difficulty, it may be tempting to try and save money by reducing or pausing their pension contributions. However, employees should think carefully before doing this because opting out of their pension will have a huge impact on the amount they have to live on when they retire, and really must be an absolute last resort. Also, if they can afford to continue making regular contributions during the present market downturn, more positive long-term growth may be generated.

10. Beware of scams

Scammers tend to sound and look completely legitimate and it’s easy to see why so many people are fooled. In fact, almost a quarter (22%) of UK adults reported being approached by scammers offering free pension advice or a free pension review, investment opportunities, or a tax refund between March and May 2022. If someone reaches out with an offer which seems too good to be true, it’s vital to check whether the company is registered with the Financial Conduct Authority (FCA). Individuals can also visit the FCA’s ScamSmart website which includes a warning list of companies operating without authorisation or running scams.

Jonathan Watts-Lay, Director, WEALTH at work, comments; “Now is a great time for employees to  work out what their  financial situation really is, and take action to make sure they are in control of their finances in 2023.”

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. Key to this is offering financial education and guidance to help employees understand their finances including ways to manage a budget, make savings and manage debt, as well as how other workplace benefits available can help. With the cost of living crisis hitting many hard, supporting employees to build their financial resilience and improve their financial wellbeing is of utmost importance right now.”