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By Wesleyan

Managing your money in 2023

financial planning
financial wellbeing
8 min
Mature professional woman sitting at desk in office holding glasses in hands and looking out window

As the cost-of-living crisis continues to bite, our new research has revealed just how worried Brits are about their finances going into the new year.

After 12 months marked by record inflation, soaring interest rates and spiralling energy bills, the survey results show how people are planning to prioritise and manage their money next year. We asked Linda Wallace, Director of Wesleyan Financial Services, to share what Wesleyan’s research uncovered about how Britain plans to manage its money next year, and what she urges people to consider as they shape their plans for the year ahead:

Do what you can to build an emergency fund

Our survey of 2,000 Brits found that a third (31%) would run out of money in a month or less if they had to live off their savings.

While many will understandably find it incredibly hard to build a savings pot at the moment – and some will have had to dip into their savings to help meet a higher cost of living – any amount that you can set aside for a rainy day will help you manage those unwanted, unexpected costs. 

In an ideal world, we advise clients to have three to six months’ worth of average outgoings put away that they can easily access, in case of unexpected expenditure – although again, the important thing is to do the most with what you can. 

Controlling costs of living

Our survey showed that 73% of UK adults are entering the new year worried about inflation.

It’s an emotive topic for many – financial challenges can cause stress and anxiety to spill over into your personal and family life. While it may feel like a lot of the financial challenges that you face are out of your control, it can help to utilise a budget planner to help you identify and separate essential and non-essential spending.

This may sound like an obvious solution or something that is too time-consuming to fit in with busy lives. However, it can be a small step towards taking back control of your finances.

Don’t stop investing for your retirement

A quarter (24%) of those we surveyed said they will dip into their savings and retirement pots to try and boost their income during 2023. 

We’re urging people to carefully consider the longer-term implications of doing this – especially accessing pension savings. Taking money from a pension early can come with a significant tax bill, and potentially limit what you can afford to do when you do retire. 

Saving into a pension is a tax-efficient way to save for the long-term, which is particularly useful in the current economic landscape of high inflation, which will be eroding the purchasing power of your hard-earning savings.

If you can afford to, it’s a great idea to consider how you can maintain and increase your pension saving throughout the year. Getting into a habit of pension saving not only increases the options you have in retirement but saving into a pension is one way to help your money go further. For example, funds you put into retirement savings benefit from the government adding in an extra ‘share’ in the form of tax relief, and your employer may add a contribution too. 

Make the most of any increases to income

A quarter (27%) of the women and two in five (41%) men we surveyed said they were likely to ask their employer for a pay rise in 2023. 

Interesting results here show that women are less likely to ask for a pay rise than men. Many women feel uncomfortable or lack confidence in asking for the pay-rise they deserve. In light of the rising cost of living more woman should be encouraged to have these conversations. Do some research into the average pay in your industry, it is much easier to go into negotiations if you are armed with data to help back up your points.

While many may need to use any extra funds they secure to help meet higher costs, consider how you can make your extra income work as hard as you. 

One way to do this is to consider pensions salary sacrifice. This is where you and your employer agree to reduce your salary, and your employer then pays the difference into your pension. Despite having a lower salary, the tax benefits can actually mean your take home pay is higher, and you’re saving for your retirement. 

Our survey also revealed that over 20% of UK adults are also considering a ‘side-hustle’ such as a second job or selling skills or products, alongside a full-time job. It would be a good idea to invest this money and help it grow in value.

Assess your risk

More than half (55%) of people we spoke to say they feel investing in the stock market is risky.

They’re right that there is some risk involved; where there’s the potential to gain, there’s the potential to lose too. However, there are different ways of investing that come with different levels of risk – and there could be a level that’s right for you.

While you might have previously thought about your attitude to risk, your circumstances may have changed. As you start the new year, consider where you stand now – and whether this means you could change how you manage your money, including considering investments or re-considering your portfolio. 

Consider taking the investment plunge

Our research reveals Brits have a whole host of misconceptions about investing that may be stopping them reaping the potential rewards. Two in five (41%) said they thought investing in the stock market was only for the rich, for example. In fact, pretty much anyone can benefit from investing and there are ways of investing to suit most circumstances. 

Investing can have significant benefits – including helping to protect your money against the ongoing effects of inflation, by growing its value faster than prices rise. 

If you’re ready to take the investment plunge, you could consider an option like a stocks & shares ISA.

By saving into an ISA, any gains from the money you invest are entirely tax free. Every adult can invest up to £20,000 every tax year in an ISA. But be aware – you lose your allowance at the end of every tax year in April, leaving just a few months left this year to make the most of what you can put aside. 

Bear in mind that the value of investments can go down as well as up and you may get back less than you invest.

Our other statistics

  • 73% of UK adults are going into the new year worrying about the impact of inflation
  • 44% of savers have almost one-third of their money in a standard cash bank account, potentially missing out on opportunities to protect their money from inflation
  • 46% said they would run out of money after three months next year if they lost their job
  • 24% plan to dip into their savings or pension in 2023 to bolster their income amid higher costs
  • 30% plan on asking their employer for a pay rise next year
  • 55% of people think that investing is risky and 46% will completely stop investing 

Wesleyan’s research was conducted by Censuswide between the 28th November and 1st December 2022. 2,000 UK adults were polled.

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