The start of each new year, is considered a very apt and appropriate time to get your financial affairs in order. Or at least in a better financial position. So what sort of steps can you take to get your finances in order in 2025.
The start of each year, is considered a great time to review your monetary goals and aims for the year ahead. So let’s look at some simple tips can make all the difference.
Let’s break it down into some simple bitesize chunks !
Firstly, track your spending, where is your money going.
First of all, look at your income and spending habits. It’s worthwhile getting an idea of what money (income) you’ve got coming in and going out (expenditure) can help you to budget.
Spending can be split into two main categories: your household bills and lifestyle choices.
Bills will include expenses that are unavoidable outgoings, so they are essential. Such as rent or mortgage costs, utilities, food, life and home insurance costs and travel or commuting costs.
Lifestyle outgoings may include a gym membership, music and TV subscriptions, socialising, entertainment, holidays.
There are easy ways to track this now, you don’t have to just rely on your spreadsheet skills. Most modern banking is done via apps and they can do a lot of the work for you. Whereby they will track your expenses, and some apps even split out your income and expenditure into ‘sections’ that you can create quite simply.
Some banks allow you to set limits on their app and will send you notifications when you’re approaching your set limit. You can opt to keep an eye on spending for a month, or you can look back at previous months to gauge your spending. It’s a good way to see what patterns are emerging and you will be surprised at where your money ends up going each month.
So don’t ignore your current financial situation. Are you finding yourself living pay check to pay check. Or are you constantly struggling to make ends meet ?, are you stuck in a never ending cycle of debt, which you are unable to break out of.
Checking your account regularly could help you to feel more in control of your spending. It could alleviate the financial burdens you may have at present, or alleviate any stress have you may have handling money.
2. Learn to create a monthly or annual budget
Once you have a better idea of your spending habits, and where your money is going each month. You can set up and work out a simple and itemised budget.
The importance of individual lifestyle spending differs from person to person. But it can be a good place to start if you’re trying to find things to cut back on to keep within your budget.
You may find that certain areas are having a greater effect on your monthly spending. Are you paying too much in rent or mortgage costs. Do you eat out several times a week via restaurants or takeaways or ease. Are you in the pub most nights or all weekend catching up with friends and forever socialising. I’m not saying that you become a hermit and ignore all forms of social interaction, but if it’s excessive and having an adverse affect on your monthly finances, could be be an idea to limit or reduce spending in that area.
You can also look to slim down your subscriptions, do you find yourself having amazon prime, netflix, sky sports, Spotify to name a few examples. Do you have the time to watch all these subscription services, do they offer value for money. Could it be an idea to limit the number of subscriptions that you have or watch. It may be that you joined a service to watch a specific series, and find your now watching those channels any more.
So by creating budget it will show patterns of where any unnecessary spending it taking place, or areas that you may be overspending and may wish to reduce or limit in future.
There is somewhat commonly called the “50/30/20 rule”, in that 50% of your money should go on essentials or needs, 30% on wants, and 20% towards your savings.
3. Learn to manage your debt
There are 2 types of debt, what we cover go and bad debt.
A good debt may be to cover a long term mortgage, as it may be on a low rate over numerous years to cover somewhere to live. At the end of the term the mortgage will be paid off and you will then own the home.
A bad debt may be credit card fees or short term car loan on much higher rates of interest. You may pay a car on finance but the car will lose money in the long run it’s what we call a depreciating asset.
Or do you have excessive credit card debt and you may be making just the minimum payment each month as part of the agreement. But are you then spending a sum each month in interest costs, if so are those costs adding up each month. Or is the outstanding balance being reduced, is there an end in sight to clear these unwanted costs of expenditure.
Could you transfer or consolidate your debts, into a new 0% deal on a new card with a new provider. Thereby saving you interest each month, imagine the feeling of not having to pay interest and charges for the outstanding debt you have. Once those debts are paid off, you can keep on track of them in future. You may even change your spending habits in future, so you may only make purchases via a debit card. You may limit spending on credit to big tickets time such as holidays.
What about a debt consolidation plan, where you may link all your debts together to simply them and make them easier to manage and control. Or they are easily trackable with one specific lender. But be aware of the conditions attached and any fees that may be applicable.
If your debts do concern you, it may be worthwhile speaking to somebody to help you through this situation. You could use http://www.citizensadvice.org.uk, or http://www.stepchange.org.uk as free organisations to help you.
4. Learn to create an emergency fund
One you do have your finances on track, it’s ideal to build a buffer zone. So building an emergency fund can be helpful in the event of something unexpected happening. What would happen if you lost If your job, fell ill and went on half pay or SSP. What if you received an unexpected bill such as boiler repair, car repair that may need fixing straightaway. If you managed to have some emergency cash set aside, it could prevent the need for you to borrow money at short term notice at very high interest rates. Plus, could you be able to borrow that money if you have poor credit ratings, and how long would the process take to complete.
It could be a good idea to work out how much you think you can set aside each month. Work out an amount you think you might need and then plan how you intend to save for it. How much you need to save depends on your personal circumstances and what works for you.
The idea of putting money aside may seem daunting at first, but it may only be a small amount to start with. Then as you getting more comfortable and confident increase that money. Say if you were given a pay increase.
You may set yourself a goal of £ 500 or £ 1000 to start off with. Although many financial experts reskin you should have between 3 to 6 months pay set aside. But unfortunately these is out of the reach you the vast majority of people.
Remember ! This money should be set aside in a simple instant access savings account and should only be used for emergencies.
5. Could you save money by changing providers
A simple way to save money and get your affairs in order, should be to switching to a new provider or service that offers a better deal could save you money.
One example, could be your energy provider. It might not save you as much as it used to in past years. But some household energy suppliers have reintroduced some fixed deals. Between 1 January to 31 March 2025 the energy price cap is set at £1,738 per year for a typical household who use electricity and gas and pay by Direct Debit. This is an increase of 1.2% compared to the cap set between 1 October to 31 December 2024 (£1,717).
You can look to switch your broadband provideras soon as your contract term is up. Shopping around can save you money.
Another example may be your TV or broadband packages or subscription services. The the term ends it may be worthwhile to stop around to see what other providers are offering you. Or could you approach your current provider directly and get a better rate from them.
What about household or car insurance, it has proved in recent years that loyalty is no longer beneficial as some providers offer lower rates to new customers. So never simply auto-renew a policy, which is a common practice for providers now. It pays to shop around via comparison sites, or speak to them directly to get a better deal.
6. What about the idea of saving and investing
Once you finances are back on track, considering set aside some money each month. Or improve your financial situation and net worth position. Or it may be for saving up for a specific purpose such as new car, the next holiday, children’s birthday or Christmas fund.
So get in the habit of saving on a regular basis, and learn to automate your savings through simple standing order or direct debit.
Simple illustration, on the 1st of each month, I contribute a set amount amount into my personal pension and ISA. By doing this I am paying myself first and it is done simply and automatically on a regular basis. Most people save money the wrong way round, then may save an odd amount if they have any funds left, but in reality you should be paying yourself first and then spending the rest afterwards. When starting out it may only be a small amount, but increase it as you get more confident or if you are awarded an annual pay increase.
Am for an amount that you are comfortable with at first and then increase that amount, I personally save at least 20% of my net pay each month. This may seem a lot of money each month, but I started off slow and increased that over time to a level that I am now happy with.
Remember ! if you are going to save, try and shop around and get the best rates available. And put your savings within tax free wrapper such as a cash ISA or stocks & shares ISA.
7. What about your pensions !
In the past, most people worked the same employer and had what we called jobs for life. Nowadays the loyalty has gone from both employee’s and employer’s and people now change jobs every few years. In the form of a new challenge or bettering themselves, or they leave people they no longer enjoy that job or they may have been redundant.
So have you then managed to collect numerous small pots, across numerous different employers through the introduction of Auto-enrolment pension schemes. Have to managed to keep track of your numerous schemes and can you manage them and do you have the appropriate paperwork in place. Such as scheme contact details, membership number, latest statement value, completed nomination or beneficiary forms.
The idea of retiring may seem many years away for most people, as the minimum pension age is set to age 55, (although this will increase to age 57 in April 2027). But it may be worthwhile to look at your paperwork to see if you have the relevant and latest paperwork in place.
Through my current employment speaking to people every day about how they access their pensions. It surprises me the number of that people that lose track of old pensions. Some clients have even stated that they think it’s a SCAM. But it may relate to an old opted out SERPS from may years age and the provider hasn’t been sending them an annual statement, or they couldn’t find them because they moved house, going divorced or remarried and never provided up-to-date details to their respective provider.
For further information on consolidating pension or tracking them down, see my blogs attached: https:moneyminted.co.uk/how-to-consolidate-pensions or https://Moneyminted.co.uk/how-to-find-a-missing-pension
Remember !
If you found this blog post useful, please feel free to check out my other blog posts on https:moneyminted.co.uk which covers pensions, savings, investing and investment book that I recommend. So you too can improve your financial knowledge, to reach your financial goals and aims.
It’s not a get rich quick journey, but you will get there in the end if you create an action pan and think long term.
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