Understanding your payslip can be confusing, but it can play a key role in helping you build and manage your savings.
Struggling to understand what you earn could be holding millions of people back from making good savings decisions. When you consider that around half of the UK population has the maths skills of a primary school child, and many people experience anxiety around numbers, it is little wonder that our earnings can be tricky to understand.
Getting to grips with your payslip
Your payslip may look complicated and confusing, but that shouldn’t deter you from understanding it. To help you do this, the Chartered Institute of Payroll Professionals (CIPP) has produced a useful guide to help you ‘Understand your Payslip’.
By showing your regular income, your payslip can be an excellent tool for planning and building your savings funds. The payslip is also the easiest place to find information on one of the biggest savings investments you will make – your pension. These contributions are instrumental in securing your financial future. Regularly saving for retirement, especially if your employer offers a matching contribution, can help you build substantial savings over time.
While payslips primarily focus on income, they can also provide valuable insights into your expenses. Deductions for items like healthcare premiums, insurance, and other benefits are typically listed on payslips. By reviewing these deductions, you can gain a better understanding of your overall financial picture and potentially redirect funds towards your savings goals.
Additionally, it is also worth checking if your employer offers a payroll savings scheme. These are designed to help people build a savings buffer or support goal-based savings plans, such as a holiday or a wedding, by diverting a portion of your pay into a savings account each month. Like pension savings, the automated nature of this process makes it an easy way to establish a savings habit.
It is a tough time for many people to be thinking about saving, but for those who take time to review their payslip, it can allow you to optimise your finances and enhance your ability to save, invest, and plan for a secure financial future.