7 Personal Finance Tips for Employees

We’ve been writing about financial stability and financial wellness and the topics have been going over well. Because of that, we wanted to dive into some personal finance tips for employees in this article. We’ll cover everything from budgeting to investing and why understanding these things matter in the workplace.

Create a Realistic Budget

A budget is the cornerstone of financial health. Start by tracking your income and expenses to see where your money goes each month. You can download different apps to do this (Mint or You Need a Budget) to simplify the process. Or, you can simply go through your statements and write down what you’re spending, what you have left and how you want to use your money differently.

A lot of people follow the 50/30/20 rule and it helps when starting a budget:

50% for needs: Essentials like rent/mortgage, utilities, groceries, and transportation.
30% for wants: Non-essentials like dining out, entertainment, and hobbies.
20% for savings and debt repayment: Building your emergency fund (more on this below) and paying off obligations like student debt, lines of credit or extra mortgage payments.

Build an Emergency Fund

The next personal finance tip is all about preparing for the unknown.

Life is unpredictable, and having a financial cushion will prevent a small hiccup from becoming a crisis. As soon as it’s possible, creating an emergency fund is the next step to financial stability.

Aim to save 3-6 months’ worth of living expenses in an easily accessible account – Not in an investment account. Start small if needed, setting aside a portion of each pay until you reach your goal. If you have extra money come in, place it into this account. If you get a raise at work and don’t need to use this money on monthly expenses, directly put this additional income into the account every time you get paid.

A great way to build an emergency fund is to have the money directly leave your account via automatic withdrawal on a certain day. With it automatically leaving one account and going to another, it will be less tempting to use the money. Eventually you won’t even realize the money is gone and you’ll look at the emergency fund and be pleasantly surprised at how large it has gotten.

Reduce and Manage Debt

We touched on debt in the first tip, but we wanted to dig into debt a bit more. Debt can be a significant burden for many people. It can live over your head knowing it needs to be paid off, but you can easily feel overwhelmed on where to start.

With a plan, it’s manageable:

Prioritize high-interest debt: Focus on paying off high-interest debt like credit cards first, as they accumulate the most interest.
Consider the debt snowball method: Pay off your smallest debts first to gain momentum, then move on to larger ones.
Refinance or consolidate: Look for opportunities to refinance loans at lower rates or consolidate debts to simplify payments.

Save for Retirement Early

The earlier you start saving for retirement, the better. Take advantage of employer-sponsored retirement plans. We know how important saving for retirement is, so we’ve written a lot of articles about this topic. Feel free to read through our Retirement Savings blog category to read all of them.

Discuss with your employer what they offer and how you can increase your contributions when ready. If you’re an employer and retirement isn’t included in your benefits plan, contact Navy & Sage Benefits today to change that!

Invest Wisely

Just like saving for retirement, investing can seem daunting, but it’s essential for long-term wealth growth.

Here are some strategies to get started:

Educate yourself: Understand the basics of stocks, bonds, and mutual funds. Books like “The Intelligent Investor” by Benjamin Graham can be a great start.
Diversify your portfolio: Spread your investments across different asset classes to minimize risk.
Consider low-cost funds: These funds offer broad market exposure at a low cost, making them ideal for beginner investors.
Automate investments: Set up automatic transfers to your investment accounts to ensure consistent contributions.

If you’re ready to start investing, working with a financial planner will make it easier. They will take charge of these tips above and help your money go the furthest it can. Please let us know if you would like an introduction to one of our Trusted Industry Partners.

Plan for Major Purchases

Whether it’s a home, car, or a vacation, planning for major expenses/purchases help you avoid debt and stay on track financially.

Set a timeline and savings goal: Determine how much you need and by when, then break it down into monthly savings targets.
Create a dedicated savings account: Keep your funds separate to avoid spending them on other things.

Major purchases should always be considered before committing. Many people have wish lists on their phones to consider and think about a purchase before making it. This helps ensure that you and your family are spending the money on the right things at the right time.

Improve Your Financial Literacy

Knowledge is power when it comes to managing your money. The more you know, the better you understand. Especially when it comes to the confusing world of finance!

Take advantage of resources such as:

Workshops and seminars: Many employers offer financial wellness programs—take full advantage of them.
Online courses: There are many different websites that offer affordable courses on personal finance. You can also deep dive into financial wellness on Youtube, which is a free option!
Books and podcasts: There are countless resources available other than Youtube and courses—some popular ones include the “Bogleheads Guide to Investing” and the “ChooseFI” podcast.

Why personal finances matter

Employee personal finance is such an important part of financial wellness. When employees feel secure with their finances, they will feel secure in their future. This will allow them to lessen their stress load, which will create healthier and happier employees.

Encourage your employees to create budgets, build emergency funds, reduce debt load and save for their future.

If you’re ready to help your team with their personal finances, reach out to Navy & Sage Benefits today. We can discuss what we can offer employees through benefits plans that will provide education and opportunities to increase their financial wellness. If you’re an employee reading this, please send this article to your employer and let them know that personal finance is important to you and you’d love for them to include more financial wellness into your benefits plan.