It’s always good to get the most from your pay cheque. After all, you work hard for the money, so getting most bang for your buck makes financial sense.
At the heart of good money management is setting and sticking to a budget. Get it right and you can make the most of your hard-earned cash without cutting back or missing out. Simply by working smarter.
Understand what’s important before you budget
There’s little point in creating a budget you won’t follow. To understand what’s behind your financial decision making, and to avoid any unhelpful behaviours, take Smart About Money’s Life Values Quiz.
It will help you understand your financial values and explore how to break away from any that prevent effective money management.
Get organised and find out where your money goes
Budgeting might sound daunting, but it’s as simple as understanding how much money comes in and how much goes out. Then redistributing it to fund your priorities. To do this, you need to understand where you spend your money each month.
Why not set some time aside on the weekend to sit down on your own or with your partner. Then organise all your paper or online credit card and bank statements and any bills.
Using these documents, you can then work out what you actually spent last month. Note down every expense including small items like coffees and bank fees to larger costs like car insurance, groceries and loan repayments.
The Money Advice Service has a handy online budgeting tool that will help you capture every last penny and provide you with a breakdown of your finances.
Now you know where your money is going, it’ll be easier to take steps to get back in charge of your spending with the following tips.
Get your budget back on track
It can be tempting to make lots of small cuts to your spending. But being penny wise and pound foolish isn’t the most effective first step you can take. Rather than reducing minute amounts here and there, cut back on bigger bills for a much larger impact.
For example, if your car’s a money pit, it might be better to purchase a new, reliable car that costs much less to run in fuel. Reviewing your mortgage rate and household bills is another great way to create generous savings.
Most households will find that food is another major expense. There are plenty of ways to save including:
● Online grocery shopping - you’ll be less tempted to buy things you don’t need and you can set and stick to a budget more easily as you keep an eye on your total cost
● Replace branded goods - supermarkets’ own brands are often just as good and much cheaper, in the case of tea up to 95% less expensive
● Plan your meals in advance - then buy only what you need
● Buy mega packs of staple goods - they’re usually far cheaper per hundred grams than smaller packs and can save you up to 50%
Budget smarter - take advantage of tax breaks
Wouldn’t it be great if you could make your salary work harder by paying less tax? Well, you can, with salary sacrifice. Most employers offer a range of employee benefits using this tax-efficient approach including:
● company cars
● cycle to work schemes
● gym memberships
● car parking near your workplace
● employer pension contributions
Take a look at some of the items you already pay for out of your net salary (after tax has been taken) and see if your employer offers the same products or services via salary sacrifice. If they do, you can exchange part of your gross, pre-tax salary in return for the benefit. This means you won’t have to pay tax on the part of your salary that you sacrifice.
In essence, this means you’ll get a similar product or service with a significant saving that’s determined by your tax bracket. And you’ll often also benefit from lower costs because your employer, or their benefit provider, can leverage their buying power to secure better deals.
The other major household expense is childcare. But due to new regulations, if you want to take up tax efficient nursery vouchers for the first time, you’ll need to use the government’s scheme.
Budget harder - cut back on non-essentials
Outgoings higher than your income? Or do you want to save more for a holiday or a rainy day?
If the previous tricks simply aren’t enough, decide what to cut back by prioritising your expenses. When your car is necessary to get you to work, this is a must-have. But if you’re spending a small fortune on non-essentials, there are alternatives:
● join your local library and get books and magazines free both in-person and online
● cut disused gym memberships and tune into Youtube for free yoga and other exercise classes you can do from home
● make your own lunch and only treat yourself to a shop-bought lunch on a Friday
● invest in a reusable coffee cup, a mini cafetiere and some decent coffee and make your early morning cup at work
You’ll be amazed at how much you can save by making minor and major adjustments like these. Whether you want to save for something special or get back into the black, you can get there by creating your budget and finding smart ways to make your money work harder.
Is your firm already a Tusker customer? Create an account or log in to see which car could work for you. Or, if your company doesn’t offer salary sacrifice cars, find out more by visiting our website.