The following is a guest post by Bella Wanana. Bella is a dreamer and writer who is passionate about personal finance. You can follow her here to be a witness of her eclectic life. Enjoy!
Employers, employers, employers. They are what most of us depend on for a livelihood, and they are the places where we spend more than 40% of our waking lives in. These companies, ranging from a small 10-people startup to a multi-million-employee conglomerate, are non-living entities that collectively breathe and produce and impact every single aspect of our lives.
Of course, as entities powered by human beings, employers cannot neglect to take care of the very source of their energy – the employees themselves. Your employer may offer benefits that you, a regular employee, can take advantage of to help with your savings and life goals. Below are a few common tips and tricks that I have used in my personal life.
Take advantage of your company’s employee matching program for retirement funds
Although in the last few years, more and more employers have switched from defined benefit retirement plans (DB), which provides a stable source of income to their employees upon retirement, to defined contribution retirement plans (DC), which only guarantee the amount contributed but not the returns, most companies still match a certain percentage of your contribution to the company-sponsored retirement fund. The exact percentage differs by employer, but, regardless of the number, make sure that you contribute as much as you can, ideally the full amount. Granted that there may be cases, such as having to cover for an emergency medical bill, or you are focusing on building your emergency fund, that you prefer to have access to the money that would otherwise go towards your retirement income, you should switch back as soon as you reach these short-term goals. While it is true that there are restrictions for accessing the funds – typically you can’t access the funds till you are at least 55 or 60, but this is 100% guaranteed return at a rate of 50% (if you contribute $1 and the employer contributes 50 cents), or more. Not even Warren Buffet, who is believed to be the best investor in the world, could claim to consistently succeed at this rate.
Take advantage of automatic deductions with your pay checks
Many employers take automatic deductions, most commonly for your income taxes and company-sponsored insurance premiums, directly from your pay checks. Additionally, if you elect to participate in the company-sponsored retirement program (which you really should as I mentioned above), your contribution to the fund is also automatically deducted from your pay checks. But you can go one step further: employers could also automatically deduct from your pay checks your contributions to your own savings accounts, such as your 401(k)/Registered Retirement Savings Plan (RRSP). Although your company most likely won’t provide the same matching benefit on your individual accounts, this technique can help you save money, because you won’t even be able to see the money showing up in your bank account to begin with. You will be much less likely to suffer from separation anxiety from your money, will get accustomed to a lifestyle using only the money you have access to, and the money locked away will grow to become a nice nest egg for you to enjoy down the road.
One important thing to note is that before you set up the automatic transfer to your 401(k)/RRSP, you should do some calculation to make sure that you won’t be at the risk of over-contributing over the full year. This is especially true if you have switched jobs mid-year, or have multiple jobs, or have 401(k)/RRSP accounts with multiple financial institutions, as it may be challenging for an outsider other than you to keep track of everything for you.
Maximize usage of your employer’s insurance benefits
First and foremost, celebrate the fact that your employer actually offers insurance benefits for you! After that, please make sure that you familiarize yourself with all the benefits that your company offers. I know that reading the pamphlets can be a really pain sometimes, but there could be many hidden gems in them. Oftentimes, in addition to the standard drugs and dental benefits, your employer can also offer benefits on, for example, registered massage therapy. Instead of going to an expensive restaurant for a fancy dinner, why not use some of your insurance benefits for a deep tissue massage (please make the point to call ahead and confirm that it will be reimbursable) at a nice spa? That’s a nice way for some self-pampering for sure. You can even team up with your significant other and enjoy a couple’s massage – that’d be a nice date night without having to shoulder 100% of the cost yourselves.
If you are fortunately healthy enough to not need all the services provided in your insurance benefits, and you are not interested in paramedical services even for relaxation purposes, you could potentially redirect a portion of the benefits towards a taxable health spending account. Depending on your company’s policy, this account may be used for general health-oriented activities, such as fitness classes, gym memberships, or even golf memberships. Note that these count as taxable benefits so you’d still have to pay income tax (let’s say 30%), but for the fitness enthusiasts out there, who doesn’t want to join a fitness class at a steep 70% discount?
Take advantage of your company’s perk book
In addition to the relatively standard benefits such as retirement matching and supplemental health and dental insurance, many companies also offer additional discounts in partnership with external organizations. Your company can usually negotiate a much better deal with the external partners than what you can do by yourself, simply because your company represents a much bigger pool of potential clients. You could get discounts on auto insurance, mortgages, shows, or even concerts. My company even offers discounts for fresh flowers, which was a very pleasant surprise when I was researching for gifts for Mother’s Day! Make sure you familiarize yourself with these unique discounts your company offers, and take advantage of them whenever possible.
Make sure that you reimburse all your business expenses
Spending money on behalf of your company could be a pretty regular part of your day-to-day, depending on your position. Most likely, your employer will require you to use a corporate credit card for company’s expenses, but sometimes, you may have to use your personal ones. Regardless of the cards you use, make sure that you spend within your company’s policies, collect all the receipts, and submit the reimbursement requests before the deadline you company outlines. These are expenses that should not come out of your pockets, so don’t let them!
When you submit your receipts, the company will generally require that you provide at least some description. One good strategy I find useful is to make a quick note on your receipts as soon as you get them. When I first started working, I made the mistake of throwing all receipts into one drawer and only clearing them out all at once at the end of the month. But by the end of the month, I had already forgotten exactly why I spent the money, so it was a huge hassle going back to hundreds of emails to try to sort them out. Don’t be like the inexperienced me, and take a quick note while your memory is still fresh.
I hope the tips above are helpful for you. Let’s take advantage of the perks employers provide to enhance our own lives.
