Top tips to help people cut costs and manage their finances.

4th November 2024

According to WEALTH at work’s research of over 2,000 workers, the biggest financial concerns for the year include not having enough savings for unexpected costs (40%), not being able to save enough for the future (38%), not being able to pay basic living costs such as rent, mortgage payments, energy bills, food etc. (34%) and being in debt (29%).

This Talk Money Week, WEALTH at work has outlined some top tips below to help people cut costs and manage their finances.

1. Create a budget – The first step to cutting 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 outgoings they have. Outgoings can then be divided into fixed costs which have to be paid such as a mortgage, council tax, energy and water, and then those which may be able to cut back on such as supermarket shopping, monthly contracts for TV, subscriptions and other spending. Some banks have apps which enable this to be done automatically; this will 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 £1,220[1] on eating food out (e.g. takeaways and restaurants) each year. There are many free budgeting apps available which will help to track spending on groceries, eating out, entertainment etc.

3. Shop wisely – Plan shopping in advance as it will allow time to search for the best deals and reduce expenditure on non-essential items. Also, by switching brands it might be possible to significantly reduce the price of the regular shop. Someone who usually spends £60 a week, could save £20 by changing supermarkets, a saving of £1,040[2] a year, and more for a couple or family. When it comes to big purchases, such as if a washing machine breaks, discount vouchers are often available through voucher and discount websites and many workplaces offer employee discount schemes (see tip 10). When shopping for a particular product, Idealo finds the best price online for a particular product and 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. Price comparison websites can help to make it easy to compare the different deals available. Changing to a SIM only deal on your mobile once you’re out of contract could save £321 a year. Plus, changing broadband providers could save £179 a year[3].

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 £460[4] 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% 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 those struggling with debt, a good option could be to consolidate any debts into a 0% 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 of thumb, 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[5] .

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% minimum contribution with employees required to pay 5% to bring the total pension contribution to 8%. Individuals should check the contributions they are making and consider whether they can afford to increase these. 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% saved each year into a pension, matched by an employer can increase a pension pot by 25% in retirement!

10. Maximise workplace benefits – Many employers also offer other perks such as discount schemes with major retailers on groceries, dining and electrical goods etc where lots of savings can be made. Not only this, financial education and guidance is provided in many workplaces to help people with a full range of money matters, as well as providing access to saving vehicles such as ISAs and Share Plans to help build financial resilience.

Jonathan Watts Lay, Director, WEALTH at work, comments; “It’s concerning that so many people are worried about their finances. Many employers recognise the need to help their employees improve the way they manage their money and therefore provide financial education and guidance, as well as access to saving 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. It’s always worth speaking to your employer to see what support they provide.”