For many people, the Christmas and new year period is normally a welcome holiday at the end of the year, and it’s traditionally when you over-indulge and spend time with your family.
Time off is precious, so having a few days to yourself without work commitments is worth making the most of.
But once you’ve had enough of Christmas leftovers and watching films, it can be worthwhile to set aside some time to think about your financial future.
So, during the lull between Christmas itself and the start of the new year, why not take some time out to review your finances and check you are in good shape going into 2025?
Here are some suggestions for five simple steps you can take that will mean you can face the new year with confidence.
1. Take some time to consider your long-term financial goals
It’s easy to focus on the present and forget to think about the future. So, set some time aside and resolve that 2025 becomes the year when you really start to set some long-term financial plans.
After all, once you have a clear understanding of your aspirations, it’ll then be easier to ensure your plans are aligned to fulfil them.
While it might be difficult to simply think about your future without any prompts, here are some questions you might want to consider:
- When do you want to retire?
- Are you happy in your current job or looking to move on?
- Where are you thinking of spending your retirement years?
- What’s on your retirement bucket list?
As with any major objective, the sooner you start planning for it, even in just outline form, the better chance you have of achieving it.
2. Consider your plans for 2025
As well as thinking about your long-term plans, it can also be beneficial to take time to consider your shorter-term objectives and ensure you have allowed for them in your planning.
So, a top priority before 2024 gives way to 2025 is to review your plans for the coming 12 months, and consider how they could affect your finances.
For example, if you’re planning a big holiday, are you setting money aside each month to cover the cost?
You may have other big family events on the horizon that you should be planning for, such as one of your children getting married, of the birth of a child or grandchild.
It’s worth running through the financial implications and noting down any action points you need to sort out. Doing this can help you manage the financial impact and reduce the likelihood of you having to resort to expensive borrowing to cover any financial outlay.
3. Review your income and expenditure
At the end of the year, and with some time on your hands, it can be very worthwhile to review your household budget to see if there are any savings you can make, as well as any adjustments to your spending.
If you already have a budget schedule, then it’s a good time to review it and check it’s all up to date. If you don’t, then it’s an equally good time to set one up.
It’s a very straightforward process. Although there are online tools and apps designed for this purpose, it’s easy to get started with just a simple spreadsheet.
Furthermore, most of the initial information you need can be gleaned from your recent bank statements.
Start by listing all your regular monthly outgoings. It can help to put these under headings such as utilities, savings, and borrowing. This will immediately allow you to see your regular monthly commitments.
You can then start to analyse your discretionary spending. It’s worth doing this over a few months to get an average. You should also bear in mind that your Christmas outgoings may have distorted this.
This then gives you a lot of very useful information in a single place. You may realise there are direct debits that you can cancel, or you might be able to identify where you are spending excessively and where cutting back can free up disposable income.
You will also be able to see if you are setting enough aside for your future.
4. Make sure you are prepared for emergencies
Another simple step is to think through the events that could challenge your finances and blow you off course, and hen ensure you have the necessary arrangements in place to protect yourself.
The simplest of these is to check you have an emergency fund in place, so that you have an adequate amount of easily accessible money set aside for a rainy day
This will help keep you financially afloat in unforeseen circumstances and reduce the chances that you’ll have to resort to expensive borrowing.
A general rule of thumb for an emergency fund is saving three to six months’ worth of living expenses in a safe, instant access account.
Then, it’s worth checking that you have the right protection arrangements set up, such as income protection and critical illness cover. This will help you and your loved ones maintain your lifestyle if you are unable to work due to a serious illness or an accident.
If you do have existing protection plans in place, you may also want to check that they are fit for purpose and providing you with the right levels of protection.
5. Think of your legacy
A good way to start the new year is to give yourself some valuable peace of mind by ensuring your financial legacy details are up to date and in order as you head into 2025.
If you already have a will in place, it’s worth taking some time to check that it’s still valid and you’re happy with who your assets will pass to. This is particularly important if there has been a big change in your life in the last year, such as the birth of a child.
If you don’t already have one, we would strongly recommend that you make writing your will one of your top financial priorities heading into the new year. It can be a relatively simple process and will ensure your wealth goes to who you want it to when you die.
It’s also important to make sure that both you and your spouse have wills in place.
If you have assets in both the UK and Australia it may be best to set up two wills -one for each jurisdiction. Not only does this create a clear separation between the assets you have in each country, but it can also help speed up the probate process.
Get in touch
At bdhSterling, we have a wealth of experience in helping clients with their financial planning.
Get in touch to find out how we can help you for the new year and beyond.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
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All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
