New Year’s Resolution
If you’re heading into the 2025 holiday season yet again wondering how you’re going to pay for all the added expenses that come with it, then perhaps it’s time to consider a New Year's resolution to get your finances in order.

Research in the United Kingdom has found that almost half of Brits don’t have no savings. This means they find themselves in a bind when an unexpected bill comes along or they are temporarily off work due to illness or a personal emergency. Without savings, you can only pay for these urgent costs by borrowing. Regardless of whether you use a credit card, a payday loan, a personal loan, or an overdraft, these all cost money.

This means that anyone who doesn’t have savings will find themselves spending more money, which in turn, inhibits their ability to save. This is what is known as a “debt trap”. It’s called this because it can be difficult to escape from.

Additionally, anyone who doesn’t have savings isn’t earning interest or returns from investments that can help them to grow their wealth over time. Compounding the problem further. What’s more, a study conducted by Nottingham University Business School and Willis Towers Watson found that 42% of British people are not interested in saving for the future, and instead focus on “enjoying their life now”.

So, if you’d like to escape a debt trap or you’ve been living “for the now” and would like to start taking saving more seriously, here’s how you can get your finances back on track in 2025. 

Getting your finances in order is an excellent New Year’s resolution that can positively impact your life. Here are some practical steps to help you achieve financial stability and set yourself up for success:

  1. Set Clear Financial Goals:

    • Short-Term Goals: Identify immediate goals, such as paying off a specific debt, saving for a vacation, or building an emergency fund.
    • Long-Term Goals: Define long-term objectives like saving for retirement, buying a home, or funding your children's education.
  2. Create a Budget:

    • Track Income and Expenses: Record all sources of income and track your monthly expenses to understand where your money is going.
    • Categorize Spending: Divide your expenses into categories (e.g., housing, groceries, entertainment) to identify areas where you can cut back.
    • Set Limits: Allocate specific amounts for each category and stick to these limits to avoid overspending.
  3. Build an Emergency Fund:

    • Save Regularly: Aim to save at least three to six months' living expenses in an easily accessible account.
    • Automate Savings: Set up automatic transfers to your emergency fund to ensure consistent contributions.
  4. Reduce Debt:

    • Pay Down High-Interest Debt: To save on interest payments, focus on paying off high-interest debt, such as credit card debt.
    • Consolidate Debt: Consider consolidating multiple debts into a single loan with a lower interest rate to simplify payments.
  5. Improve Your Credit Score:

    • Pay Bills on Time: Ensure all your bills are paid on time to avoid late fees and improve your credit score.
    • Reduce Credit Utilization: Aim to use less than 30% of your available credit to boost your credit score.
  6. Save for Retirement:

    • Contribute to Retirement Accounts: Maximize contributions to retirement accounts like 401(k)s or IRAs.
    • Employer Matching: Take advantage of employer-matching contributions if available.
  7. Invest Wisely:

    • Diversify Investments: Spread your investments across different asset classes to minimize risk.
    • Educate Yourself: Learn about investment options and seek advice from financial advisors if needed.
  8. Review and Adjust:

    • Monitor Progress: Regularly review your financial plan and adjust as necessary based on income, expenses, and goals changes.
    • Stay Informed: Keep up with financial news and trends to make informed decisions.
  9. Reduce Unnecessary Expenses:

    • Cut Subscriptions: Evaluate and cancel unused subscriptions or memberships.
    • Shop Smart: Look for discounts, use coupons, and compare prices to save money on purchases.
  10. Plan for Taxes:

    • Understand Tax Obligations: Consider your tax obligations and take advantage of deductions and credits.
    • Prepare Early: Start preparing for tax season early to avoid last-minute stress and potential penalties.

By following these steps, you can take control of your finances, reduce stress, and work towards a more secure financial future.

Evaluate Your Current Situation

It may not make for pleasant reading, but it’s important to understand your current financial situation before you can begin to make changes. To do this, add up all of your “assets” and subtract all of your “liabilities.”

Your assets will be the cash in your bank account(s), including any savings you have. Also, add any investments you have made (at their current value), such as stocks & shares, bonds, or precious metals like gold.

Your liabilities will include debt such as credit cards, loans, and financing on big-ticket items like furniture or cars.

If you own your home, you could also include the market value of your home as an asset and the outstanding mortgage balance as a liability. However, this could sway your figures if you own a house that’s dramatically increased in value or that you’ve been paying off for a long time, so it may be best to keep it separate.

Once you’ve subtracted your liabilities from your assets, you’ll have a number representing your financial net worth. If the figure is negative, you’re in debt, while a positive figure means you own more than you owe.

Make a Plan

Make a Plan

Regardless of your situation's significance or dire, the next step is to make a plan. If you’re in debt, you need to find the interest rate you’re paying and focus on paying off the debt with the highest rate first. Clearing high-interest debt faster will save you money in the long run and mean you’ll pay off all your debt quicker.

You’ll also want to make a budget. Add up your monthly expenses, including utility bills, rent/mortgage payments, all loan repayments, food, and other costs. Then, subtract it from your income.

This will give you what’s known as your “disposable income.” You’ll want to set some aside for things you enjoy, as this can help maintain your overall well-being while you save aggressively, but the majority of it should be focused on repaying debt.

If you have savings and debt, consider using the savings to pay off the debt. While you may feel more comfortable with a cash buffer for emergencies, you could re-borrow that money if needed. And since savings interest rates from most banks are now close to 0%, there’s little to be gained from holding on to the cash while you pay 5-30% interest on debt.

If you’re already debt-free, commit to saving a set amount each month. You could set it up to leave your bank automatically each month. 

Look For Ways to Save More

Next, you can start working on your monthly bills. By finding ways to reduce how much you spend here, you can increase the amount you can put towards saving or paying off debt.

You can do this in many ways, and you’ll likely make the most significant impact by focusing on the more prominent bills first. For example, ditching an expensive cable or satellite TV subscription to a cheaper streaming service like Netflix could save you £20-£100 per month.

You could take this further with free content from services like PokerStars TV and Crunchyroll.

If you spend a lot on takeaways or eating out, try to cook more often at home. If you struggle with following recipes or cooking, find meal kit services like Blue Apron or HelloFresh. These companies deliver ingredients in pre-prepared and pre-measured amounts, meaning you have everything you need without any complicated steps. If your grocery bill is already high, delve into your cupboards and freezer, as you’ll likely find plenty of food you can use there before buying more. 

Measure Your Progress

You won’t know if you’re succeeding unless you track your progress. This can also help serve as a source of motivation as you can celebrate that your efforts are paying off.

Regularly check that your spending is still in line with your budget. If it’s not, adjust it accordingly. This may mean you have more to use for saving or debt repayments, or it may mean you’ll need to cut back somewhere else to make up a shortfall.

You should also perform the assets/liabilities calculation periodically. This will help you track your progress and show whether you’re meeting your targets.