A financial plan for a strong start in 2025
A new year is the perfect opportunity to reflect on what has passed, celebrate accomplishments, and plan for the future. At this time, many people are more motivated to get organised and pursue their goals. Below, our Grantham financial planners suggest some ideas to set the tone for your year in 2025.
Take stock
Christmas can be a very expensive month, with the average British person spending £740 more than they normally do. Indeed, as many as 1 in 5 adults could go into debt to cover their festive spending.
January can also be a financially challenging month due to its length (31 days) and early paycheques in December, which many people struggle to “stretch out” across 5+ weeks.
Ideally, you will have a plan ahead of time to avoid excessive Christmas spending and live within your means in January.
Regardless, it helps to take stock of your finances at the start of a new year to review your current position, your net income and evaluate your net worth (assets versus liabilities) to gain ideas about how to strengthen your financial standing.
Review your goals
Look back at the past 12 months. What have you achieved? What are you proud of?
Perhaps you managed to consistently overpay your mortgage, clear your student loans or start a new business. For some, “success” will largely be defined as “staying afloat” during a difficult year (e.g. due to lost work and rising living costs).
The new year is a great vantage point to survey your progress towards your goals and look ahead at what could be possible.
Remind yourself of your short-term and long-term goals. For the former, perhaps you hope to finally put down a deposit on a house. For the latter, maybe you hope to boost your pension contributions by £100 per month by the end of the year.
Whatever your goals, try to use a robust framework – e.g. the SMART system – to ensure that you are clear about your milestones and will hold yourself accountable for progress:
(SMART – Specific, Measurable, Achievable, Relevant, and Time-bound).
Strengthen your reserves
Financial advisers are renowned for stressing the importance of an emergency fund. However, there is a good reason for it.
If you happen to lose your job or encounter sudden hardship (e.g. a broken boiler), you will thank yourself for having some financial “dry powder” at hand.
The new year is a good moment to check the health of your emergency fund and re-commit to strengthening it if it is lacking. A good rule of thumb is to aim for 3-6 months’ worth of living costs.
It can also be helpful to review your wider financial protection plan – i.e. insurance policies like life insurance, income protection, critical illness cover and private medical insurance (PMI) to check these still meet your needs.
Any big events – e.g. the death of a spouse or a change in living situation (e.g. down/upsizing) – could require various policy updates. A financial adviser can help you examine your protection plan and guide you through any adjustments, where necessary.
Examine your investments
How are your investments doing? Could there be opportunities to strengthen your potential to grow wealth – e.g. by reducing fees, optimising tax planning and rebalancing your portfolio?
If you have not yet started investing, the new year is a great time to dedicate yourself to building your financial freedom. Income and assets can open up your options later, such as the chance to launch your own business (if you want to) or retire early.
Consider speaking with a financial adviser to explore how to start – or refine – your investment plan as 2025 begins.
Reimagine retirement
What does retirement “look like” for you? When you think of the future, what are you doing, and who are you with? How will you get to that vision?
Similar to investing, retirement planning helps to broaden your possibilities in later life. Perhaps you dream of travelling the world with your spouse. Or spending more time with grandchildren or pursuing untried hobbies.
For most, pensions will play a key role in retirement planning. If you are not yet retired, how well are you progressing with your contributions? How many “qualifying years” of National Insurance (NI) contributions have you built up for your State Pension?
The start of 2025 is the perfect stopping point to check whether you are on the right track to attain your retirement goals.
Perhaps your investment strategy needs attention (e.g. if your asset allocation has veered off-course since your last review meeting).
Maybe you have never spoken with a financial adviser before, but you need help tracking down old/lost pensions – possibly to consolidate them.
Whatever your goals or situation, it is very empowering to start a new year with a fresh sense of purpose and with clear financial goals. Remember, small steps taken now can lead to significant progress over the years ahead.
If you’d like to make sure you’re taking the right steps to safeguard your financial future and progress towards your goals, please get in touch.
