WEBVTT - Learn To Love Your Payslip 0:00:00.810 --> 0:00:03.000 Hey, it's Kia, and welcome back to A Little Bit 0:00:03.000 --> 0:00:06.600 Richer. Okay, cast your mind back. We all remember starting 0:00:06.600 --> 0:00:09.690 that first full- time job, getting excited to get paid, 0:00:09.780 --> 0:00:12.539 and then come payday, wondering where the hell a third 0:00:12.539 --> 0:00:14.670 of our money had gone. The answers all lie in 0:00:14.670 --> 0:00:17.070 your payslip and I want to make that little bit 0:00:17.070 --> 0:00:19.860 of paper make sense. How hard can it be? Asesh 0:00:19.860 --> 0:00:21.600 Sarkar is going to join me to help rip apart 0:00:21.600 --> 0:00:25.470 those payslips. Not literally. They're mostly digital now anyway. Anyway, 0:00:25.739 --> 0:00:28.050 Asesh is the global CEO and co- founder of Salary 0:00:28.050 --> 0:00:31.860 Finance, a leading employee financial wellness platform. He's also the 0:00:31.860 --> 0:00:35.159 chair of trustees of MyBnk, which runs financial education programs 0:00:35.159 --> 0:00:37.529 for five to 25 year olds. He knows his stuff. Asesh, 0:00:39.300 --> 0:00:41.879 let's start with the basics. You get your payslip and 0:00:41.880 --> 0:00:44.400 there's a lot of deductions. What are the main ones 0:00:44.400 --> 0:00:45.029 and what are they for? 0:00:45.090 --> 0:00:47.520 So if we take it right from the beginning, so 0:00:47.550 --> 0:00:50.880 you get your payslip, a recent survey showed that one 0:00:50.880 --> 0:00:53.549 in four people don't actually look at their payslip, and 0:00:53.549 --> 0:00:55.620 another one in four people do look at it but 0:00:55.620 --> 0:00:58.410 don't really understand it. So one in two people aren't 0:00:58.410 --> 0:01:02.069 really getting much value from their payslip. So a payslip I 0:01:02.070 --> 0:01:04.349 think of a little bit as a book or a 0:01:04.349 --> 0:01:08.280 story. A story has a beginning, it has a middle, 0:01:08.280 --> 0:01:10.889 and it has an end. And so on every payslip 0:01:10.889 --> 0:01:13.830 you have a beginning, which is your gross pay. And 0:01:13.830 --> 0:01:16.470 what that means is that's the amount of money you 0:01:16.470 --> 0:01:19.410 earn, the top line. So if you work, if you're 0:01:19.410 --> 0:01:22.200 hourly paid, and let's say you earn 10 pounds an hour, if in the 0:01:22.200 --> 0:01:24.869 month you've done 10 hours, then your gross pay is a £ 0:01:24.929 --> 0:01:27.450 100 for that month. Or if you get a salary 0:01:27.450 --> 0:01:30.690 and let's say you earn £ 12,000, £ 1000 a month, then 0:01:30.690 --> 0:01:33.540 your gross pay is £ 1000 for that month. So that's 0:01:33.630 --> 0:01:36.060 the beginning of the story. Like you say, there's deductions 0:01:36.060 --> 0:01:38.490 and other things. The middle of the story is then 0:01:38.550 --> 0:01:42.179 these deductions, so things which come out. And so there 0:01:42.179 --> 0:01:45.539 are universal deductions, things which everyone has to pay over 0:01:45.539 --> 0:01:48.149 a certain level of income, and other deductions which are 0:01:48.150 --> 0:01:50.220 specific to your employer and any benefits you may have 0:01:50.220 --> 0:01:52.980 taken up. And then once those deductions are taken, you 0:01:52.980 --> 0:01:54.600 get to the end of the story, which is your 0:01:54.600 --> 0:01:57.240 net pay, and that is how much you take into 0:01:57.240 --> 0:02:00.719 your bank account at the end. Like with most stories, 0:02:00.750 --> 0:02:03.270 most happens in the middle, and so if I maybe 0:02:03.270 --> 0:02:05.639 pick on two of the common deductions and two of 0:02:05.639 --> 0:02:08.608 the big ones. So that's tax, one of those taxes 0:02:08.610 --> 0:02:12.030 is income tax and the other is national insurance. So 0:02:12.060 --> 0:02:15.090 income tax is typically a big chunk. Income tax is 0:02:15.090 --> 0:02:18.448 collected by the government, or by HMRC, and they use 0:02:18.450 --> 0:02:22.829 that money for public services. So whether it's funding schools, 0:02:23.010 --> 0:02:26.880 hospitals, roads, other emerging service, that's how the country is 0:02:26.880 --> 0:02:31.230 funded. And when calculating income tax, it depends what your 0:02:31.230 --> 0:02:33.780 tax code is and how much you earn. So on your 0:02:33.780 --> 0:02:36.389 payslip you'll see a tax code, some digits, and some 0:02:36.389 --> 0:02:39.419 letters usually. And what that tells you is what's called 0:02:39.419 --> 0:02:43.500 your personal allowance, which means how much you can earn 0:02:43.500 --> 0:02:46.260 without having to pay any tax. For most people, if 0:02:46.260 --> 0:02:49.950 you earn less than a £ 100,000, that is about £ 12,700, 0:02:50.639 --> 0:02:52.559 and so that's your tax- free amount. So if you 0:02:52.559 --> 0:02:54.839 earn under that, you don't have to pay any tax. 0:02:54.900 --> 0:02:58.350 If you earn above that, then you are a taxpayer 0:02:58.619 --> 0:03:00.750 and then you pay one of three rates of tax, 0:03:00.780 --> 0:03:04.920 a basic amount, a higher amount, or an additional amount. 0:03:05.190 --> 0:03:08.790 That's the first chunk. The second chunk is national insurance. 0:03:08.940 --> 0:03:11.790 And so again, this goes to the government, but this 0:03:11.790 --> 0:03:15.449 money the government uses to fund, if you're ever unemployed, 0:03:15.450 --> 0:03:18.840 if you're ill, retirement, and they use this money to 0:03:19.080 --> 0:03:22.230 fund those. As it happens, I'm going to visit my 0:03:22.230 --> 0:03:23.760 mom later, I need to take her to hospital, and 0:03:23.760 --> 0:03:26.940 so sometimes people can view deductions and taxes are negative, 0:03:26.940 --> 0:03:29.490 but equally we're fortunate to live in a country with 0:03:29.669 --> 0:03:33.119 great services, and so the money does go towards that. And 0:03:33.120 --> 0:03:35.490 national insurance is a little bit like income tax in 0:03:35.490 --> 0:03:38.640 a calculation. You have an amount of income below which 0:03:38.640 --> 0:03:40.650 you don't have to pay anything. I think that's around 0:03:40.650 --> 0:03:43.559 again about 12, 500. If you earn below that, then you don't have 0:03:43.770 --> 0:03:48.179 to pay anything. 12,500 to around 50,000, you pay 12% 0:03:48.179 --> 0:03:51.120 of what you earn. And above 50, 000, it then drops down 0:03:51.120 --> 0:03:54.570 to 2% for that incremental income. And so they're the two 0:03:54.570 --> 0:03:58.380 big universal deductions. Overall, that's the story of a payslip. 0:03:58.380 --> 0:04:01.050 You start with your gross pay, what comes in, you 0:04:01.050 --> 0:04:02.880 have your deductions that come out, then you have your 0:04:02.880 --> 0:04:04.050 net pay at the end. 0:04:04.380 --> 0:04:06.150 I think that was a great breakdown. I've got a payslip here, 0:04:06.570 --> 0:04:07.741 so we have a good example to have a look at. 0:04:07.741 --> 0:04:07.891 Good. 0:04:08.520 --> 0:04:12.210 So you mentioned tax, so often that's referred as PAYE, 0:04:13.619 --> 0:04:14.100 in your payslip. 0:04:14.100 --> 0:04:14.790 That's right. Yeah, pay as you earn. That's right. 0:04:14.820 --> 0:04:15.240 Exactly. 0:04:15.240 --> 0:04:15.570 Exactly. 0:04:15.570 --> 0:04:17.610 So that is the tax that you mentioned first, and then we've got 0:04:17.610 --> 0:04:19.950 national insurance, which is also on there. So I think 0:04:19.950 --> 0:04:22.109 it's really good, like you said, even the tax code. I 0:04:22.110 --> 0:04:24.330 think a lot of people don't realize that the tax 0:04:24.330 --> 0:04:26.339 code is important, like you said, it denotes your personal 0:04:26.339 --> 0:04:28.650 allowance amount, but it's also important to make sure you're on the 0:04:28.650 --> 0:04:30.178 right tax code. I think that often happens to a lot 0:04:30.180 --> 0:04:31.950 of people who move jobs. I know that happened to 0:04:31.950 --> 0:04:33.928 me when I went to one of my jobs, I was on 0:04:34.050 --> 0:04:37.230 the wrong tax code, got taxed a large amount. But 0:04:37.230 --> 0:04:38.609 it's always good to keep on top of that. That's 0:04:38.610 --> 0:04:40.830 why, if you're part of the one in two, hopefully 0:04:40.830 --> 0:04:43.440 from listening to this episode, you will change that. So 0:04:43.440 --> 0:04:46.289 you touched on the fact that there are other deductions, 0:04:46.289 --> 0:04:48.570 so let's go into that a little bit. What other deductions 0:04:48.810 --> 0:04:49.859 could you also see on your payslip? 0:04:49.980 --> 0:04:53.820 Yeah, so other deductions tend to be employer specific things 0:04:53.820 --> 0:04:56.399 which your employer offer, and then what you choose to 0:04:56.400 --> 0:04:58.650 take up from your employer. So one of those is 0:04:58.650 --> 0:05:02.040 pensions. Actually, all employers in the UK now offer a 0:05:02.040 --> 0:05:04.709 pension. And so if you choose to do that, then 0:05:04.709 --> 0:05:07.830 you'll see that on your payslip as well, and so 0:05:07.830 --> 0:05:09.810 that leaves your payslip and then you'll see that money 0:05:09.810 --> 0:05:13.560 going into a pension pot somewhere. Another example is employers 0:05:13.560 --> 0:05:17.428 quite often offer employee benefit. So something like cycle to 0:05:17.428 --> 0:05:20.099 work is quite common in the UK, and so that's 0:05:20.099 --> 0:05:23.009 where essentially your company gives you a loan to buy 0:05:23.010 --> 0:05:25.830 a bike. That amount you don't have any tax on, 0:05:25.830 --> 0:05:28.650 so you're essentially saving on that a tax amount, and then you 0:05:28.650 --> 0:05:31.109 repay that with a monthly fee until the bike is 0:05:31.110 --> 0:05:33.928 paid off. Or about 5 million employees in the UK 0:05:33.928 --> 0:05:36.270 can access what my company offers, which is called salary 0:05:36.270 --> 0:05:38.609 financing. That is if you take a loan, we can 0:05:38.610 --> 0:05:40.409 collect the repayments on payroll to allow you to get 0:05:40.410 --> 0:05:43.140 a low interest rate. Equally, we allow you to save 0:05:43.140 --> 0:05:46.290 directly from your salary as well. And there are a host of 0:05:46.290 --> 0:05:48.270 other things. If you have any student loans, that could 0:05:48.270 --> 0:05:50.670 come off it as well. But it is always really worth taking 0:05:50.670 --> 0:05:53.909 a look at that deductions line, whether it's tax, whether 0:05:53.910 --> 0:05:57.928 it's something else, just to make sure you are not overpaying, because 0:05:57.928 --> 0:06:00.929 these things happen every payslip and if you are overpaying even a 0:06:00.960 --> 0:06:02.849 little bit every payslip, then it can start to add up. 0:06:02.850 --> 0:06:06.210 Exactly, exactly that. So I think when it comes to talking 0:06:06.210 --> 0:06:08.609 about our money and having a look and seeing how much 0:06:08.610 --> 0:06:10.889 money we've got, I find that payday is a really good 0:06:10.889 --> 0:06:13.049 day to budget. That's definitely what I do anyway with 0:06:13.049 --> 0:06:15.569 my money. So it's a good time to put away 0:06:15.570 --> 0:06:18.900 money into different pots, whether it's going out, saving money, 0:06:19.469 --> 0:06:21.810 all those kinds of things. And bills. Do you have 0:06:21.810 --> 0:06:24.420 any advice for our listeners when it comes to budgeting 0:06:24.420 --> 0:06:26.549 and almost the best practices for that? 0:06:26.760 --> 0:06:29.729 Yeah, sure. So I think it's important to remember the 0:06:29.730 --> 0:06:32.520 world we live in is a world in which billions 0:06:32.520 --> 0:06:35.760 of pounds is spent enticing us to spend our money. 0:06:35.820 --> 0:06:37.830 And unfortunately, to live in a great world where there's 0:06:37.980 --> 0:06:40.560 pretty cool things to buy, endless very cool things to 0:06:40.560 --> 0:06:43.410 buy, and so every day you're being enticed, whether it's 0:06:43.410 --> 0:06:46.709 you are watching a Reel, watching TV, you're on your 0:06:46.710 --> 0:06:50.219 computer looking at an ad, everything you look, whether it's 0:06:50.219 --> 0:06:54.330 people talking, there is just this constant opportunity to buy 0:06:54.360 --> 0:06:58.170 very cool things. Like I say, unless you budget and 0:06:58.170 --> 0:07:01.230 unless you take the time to budget, you'll just continually 0:07:01.230 --> 0:07:04.710 spend, and then are out of control of your finances 0:07:04.710 --> 0:07:06.540 and it becomes quite challenging. I think the process of 0:07:06.540 --> 0:07:09.150 budgeting is really important, and like you say, the payday is 0:07:09.150 --> 0:07:11.340 a really good time to reflect on how the last 0:07:11.340 --> 0:07:13.140 month has gone, or whatever frequency you get paid on, 0:07:13.410 --> 0:07:15.390 and then what you want to do in the next month 0:07:15.420 --> 0:07:18.450 as well. Personally, I was born in a city, not 0:07:18.450 --> 0:07:20.550 a huge amount of wealth. My parents are first generation 0:07:20.550 --> 0:07:23.639 migrants. I've done reasonably well, and so I have more 0:07:23.639 --> 0:07:26.520 money now. So I've seen people across the income spectrum 0:07:26.520 --> 0:07:29.789 and it's definitely not the case that money equals happiness. 0:07:29.789 --> 0:07:31.860 You could be happy with any level of money. But 0:07:31.860 --> 0:07:33.480 what tends to be the case is if you are 0:07:33.480 --> 0:07:36.330 in control of your finances, you do have a level 0:07:36.330 --> 0:07:38.309 of peace and a level of happiness. And if you're 0:07:38.309 --> 0:07:40.560 not in control, no matter how much money you have, 0:07:40.770 --> 0:07:44.069 you don't have that. So always recommend, regardless of your 0:07:44.070 --> 0:07:47.070 income and your position, being in control is independent of 0:07:47.070 --> 0:07:49.260 that. And so in terms of (inaudible) , a lot 0:07:49.260 --> 0:07:53.070 of financial planners recommends, which makes a lot of sense, 0:07:53.070 --> 0:07:57.059 I follow as well, if you look at your expenses 0:07:57.059 --> 0:07:59.639 and your budget, you put it into three categories. Things 0:07:59.639 --> 0:08:01.980 you have to spend, you need to spend, and so 0:08:02.130 --> 0:08:05.310 you need a roof over your head, you need food, 0:08:05.520 --> 0:08:07.860 you need to pay your bills. There's then things you 0:08:07.860 --> 0:08:11.730 want. And so maybe you like some nice clothes, you've 0:08:11.730 --> 0:08:14.489 got a nice holiday, that's fine as well. And then 0:08:14.490 --> 0:08:19.080 there's also saving for your goals, because as you get 0:08:19.080 --> 0:08:21.209 older, you are going to want to progress in life. 0:08:21.210 --> 0:08:23.129 You are going to want to deposit on a house 0:08:23.129 --> 0:08:25.680 and other things. And the general rule of thumb is 0:08:25.680 --> 0:08:28.470 that you have 50% of your income which goes on 0:08:28.470 --> 0:08:32.280 your needs. You have 30% of your income which goes 0:08:32.280 --> 0:08:34.770 on your wants, and that's quite a decent amount on 0:08:34.770 --> 0:08:39.208 things which you enjoy. And 20% on your future goals 0:08:39.210 --> 0:08:41.490 to allow you to be progressing in life as well. 0:08:41.820 --> 0:08:45.150 And then different people have different preferences and you can 0:08:45.150 --> 0:08:48.390 allocate, but just being thoughtful about that, I think, is 0:08:48.390 --> 0:08:52.170 quite helpful. It just allows you to have some balance. 0:08:52.320 --> 0:08:54.300 No, I agree. I think it's good to have a 0:08:54.300 --> 0:08:56.550 baseline. I think sometimes if you are coming to it 0:08:57.270 --> 0:08:59.218 for the first time, you don't know where to start. 0:08:59.219 --> 0:09:00.958 I think it is good to, like you say, put 0:09:00.960 --> 0:09:04.260 it down 50, 30, 20. It's a good way to look at your 0:09:04.260 --> 0:09:07.380 money. But right now where we are, for many of 0:09:07.380 --> 0:09:10.559 us, especially at the moment, it's a struggle to make 0:09:10.559 --> 0:09:12.988 ends meet. And with the money that's left over in 0:09:12.990 --> 0:09:16.289 deductions, it can be a bit hard. So it's time 0:09:16.289 --> 0:09:19.020 for the question I'm asking everyone, you've got your pay, 0:09:19.140 --> 0:09:21.660 money's in your account, but what are the three things 0:09:21.720 --> 0:09:23.790 that you can do to try and get yourself a 0:09:23.790 --> 0:09:24.450 little bit richer? 0:09:24.540 --> 0:09:28.410 So number one is budgeting. Really important. Very few people 0:09:28.410 --> 0:09:30.870 do it. Life is definitely very tough at the moment. 0:09:31.200 --> 0:09:33.150 It gets even harder without a budget. So I think 0:09:33.150 --> 0:09:36.480 number one is you're looking at your expenses, categorize them, 0:09:36.480 --> 0:09:39.750 and just making sure you're more going to make sense. Number two is 0:09:39.780 --> 0:09:42.598 pay yourself first. And so rather than saving at the 0:09:42.690 --> 0:09:44.790 end of the month in case there's any money left 0:09:44.790 --> 0:09:47.610 over, save at the beginning and let the rest of 0:09:47.610 --> 0:09:52.529 your pay cover your expenses. And number three, employers offer 0:09:52.529 --> 0:09:56.939 really great benefits, discounts sometimes, whether it's a loan or 0:09:56.940 --> 0:10:00.390 savings direct from your salary, it's really worth taking maximum 0:10:00.390 --> 0:10:03.118 advantage of that because whilst we're all one person, the 0:10:03.120 --> 0:10:05.459 benefit of an employer is they have lots of people 0:10:05.460 --> 0:10:07.559 working there so they can negotiate better rates and you 0:10:07.559 --> 0:10:10.260 may as well take advantage of it. So I think definitely have a 0:10:10.260 --> 0:10:13.530 budget say first to give yourself a buffer, and then 0:10:13.530 --> 0:10:16.440 to take advantage of all of the benefits your employer has. 0:10:16.559 --> 0:10:18.809 That's some amazing tips and I completely agree, especially on 0:10:18.809 --> 0:10:22.110 the employer element, because I've definitely managed to get some 0:10:22.110 --> 0:10:23.250 good tickets to go to the theme parks, with a good discount. 0:10:23.250 --> 0:10:23.251 Absolutely. 0:10:23.251 --> 0:10:28.380 But to Asesh, thank you so much. You have given so much 0:10:28.770 --> 0:10:32.460 insightful knowledge to our listeners, so thank you for coming on. 0:10:32.520 --> 0:10:33.208 Thank you for having me. 0:10:33.660 --> 0:10:36.540 Now then, you heard Asesh and I chatting about pensions, 0:10:36.540 --> 0:10:38.429 student loans and all that stuff, but we're on a 0:10:38.429 --> 0:10:40.800 clock and I know you're busy. These episodes have to 0:10:40.800 --> 0:10:43.020 be short. So I'm going to dig deeper into all 0:10:43.020 --> 0:10:46.348 of this. Episode three is about pensions. It's easy to 0:10:46.350 --> 0:10:48.328 think that they're only for people in their late thirties, 0:10:48.570 --> 0:10:50.640 but that couldn't be further from the truth. You'll see. 0:10:50.940 --> 0:10:53.550 In the meantime, if you're enjoying the podcast, hit follow 0:10:53.550 --> 0:10:56.399 and tell your friends. It's two things that will really 0:10:56.400 --> 0:10:59.610 help. Okay, next week, pensions. See you later.