The fundamentals of financial success are relatively simple: live within your means, spend less, save more. Simple doesn't always mean easy, however, especially when you're struggling to make ends meet.
If you find yourself stretching your paycheck to cover all your expenses, it's time to look at creative ways to make sure those expenses don't match or exceed your income. And there's one oft-overlooked option that may be able to help you do just that: your employer-sponsored workplace benefits.
Here's how to determine whether you stand to gain more financial stability via commonly offered workplace perks:
Cut the obvious expenses first
Before you dive into your benefits package, take a look at your existing expenses. Look at transactions from the last 3 months (which you can see on bank and credit card statements) and go through them, line by line.
First, highlight all your discretionary purchases—essentially, this includes everything you didn't have to buy to meet a basic need or a fixed expense (like utilities or your mortgage). Now, go back and look at everything you highlighted. Ask yourself:
- Do you feel good about each purchase?
- Is there any spending listed that you regret, or didn't wind up being valuable?
- Did you find any recurring charges for services you don't actually use?
If you find past transactions that you regret now, make a pledge to cut that type of spending behavior out of your budget. Same goes for any services you're not fully using—simply call up the service provider and cancel your account.
Moving forward, think more mindfully before you spend. Don't charge anything to your credit card until you've asked yourself, "Do I really need this? Will I regret this purchase next month? Is there a cheaper alternative?"
You can also follow the 48-hour rule for mindful spending: If you find something you feel you need (or really want!) and think you won't regret, don't make a purchase now. Give yourself 48 hours to think about it.
If you still think it's a smart choice to buy after a few days, go ahead. Otherwise, don't make the purchase (and save that money instead).
Free up more room in your budget by putting employee benefits to work
You likely found some transactions in the list that you do get value out of and don’t want to cut out entirely. For example, maybe you have to spend an arm and a leg for child care right now, or you pay hundreds per month for a membership to a specific gym because you value your fitness.
Neither of those things are inherently bad. But you know you still need to spend a little less in other areas so you can save money for important goals like contributing to your retirement plan or saving for a child’s college education.
This is a good time to make sure you fully understand the benefits offered to you by your employer. You may not need to cut these "good" expenses significantly if your workplace benefits package includes options that can help you save for those longer-term financial priorities.
Here’s what to look for when reviewing your employee benefits to see if they can help reduce your expenses:
Health insurance and related savings accounts
Don't assume that the health insurance plan you have right now will always be the most cost-effective option for you and your household. Take the time to evaluate health insurance options during open enrollment each year and consider how to get the most out of the money you spend.
That might mean considering an HSA-Eligible Health Plan this year, which can help you reduce your monthly premiums and give you access to a health savings account (HSA). HSAs are powerful tools, because they're the only health-specific accounts that let you contribute money tax-free, invest and generate earnings from your contributions tax-free, and withdraw the money to use on qualified health care expenses tax-free.*
Depending on your situation, you might want to consider making use of a flexible spending account (FSA) instead. FSAs are similar to HSAs in that the money you contribute to the account is free from taxes when used for qualified health expenses. The big difference between an HSA and an FSA is that FSA money is typically "use it or lose it" within the calendar year, whereas with an HSA, unused balances roll over from year to year (even if you retire or change jobs, so it can help with future health care costs too).
There are many advantages of contributing to an employer-sponsored retirement plan like a 401(k), 403(b), or SIMPLE IRA.
Say, for example, your employer will fully match your 401(k) contribution up to 3%. If you make $60,000 per year and contribute that 3%, it means you'll put $1,800 into your account—and your employer will also put in $1,800.
If your company offers to match your contributions up to a certain percentage, take advantage of the help. Don't leave that money on the table. Contribute at least enough to get the match.
Depending on your job and responsibilities, continuing education might be an important investment to make in your future.
But before you spend your own money on courses, trainings, or events (and travel to and from them), check to see if you have options for professional and personal development through your benefits package.
Even if there's nothing specific included in your benefits, reach out and talk to your manager or company leadership. Ask about options for continuing education and see if you can negotiate support from the company before you make a financial investment on your own.
Childcare and other lifestyle benefits
Does your company have onsite childcare that would cost less than the private daycare your kids currently attend? What about a gym somewhere in the building that you can access for free (instead of shelling out hundreds for a boutique place down the street)?
Here's where you can look at your existing expenses and see if there are cheaper (or free) alternatives available within your benefits package.
You might need to make some changes, like going through a service provider that your company chooses, but the discount you receive and the savings you can enjoy will be worth it if they help you break the paycheck-to-paycheck cycle.
Your employer likely offers some sort of life insurance and disability insurance. If the policy your employer will cover for you sufficiently meets your needs, take advantage—especially if they're paying the premiums!
Avoid paying for an over-large policy on your own and adding to your monthly expenses. Sign up for coverage through your employer.
Finally, make sure you claim any reimbursements you're entitled to as an employee. Learn the correct process for tracking expenses and receipts as well as submitting requests for reimbursement. Don't pay out of pocket when your company is willing to pay you back.
At the end of the day, don't assume that you've discovered every valuable element of your employee benefits package. Reach out to your HR department or the individual who handles HR for your company, request a list of the benefits offered to ensure you're taking full advantage, and review it in full to see how using company benefits can help you avoid adding to your expenses.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917