Along With Health and Fitness Commitments, You Should Also Make Some Financial Resolutions to Improve Your Finances in 2025
The festive season is always a good time to sit back, reflect on our hopes and fears and to make plans for the coming year.
Alongside health and fitness commitments, many of us will also make a number of financial resolutions.
To help you with this, we have put together some ideas, covering four important topics.
1 - WORK OUT WHAT YOUR MONEY IS FOR
Google “money” and you’ll get over 3 billion results. Everyone’s got their opinion. Some will tell you that it’s the root of all evil, others that it makes the world go round.
It can be very emotive, but at a simple level it’s just a tool, a method of exchange.
So, what do you want to exchange yours for?
Without a clear vision of what a successful financial future looks like to you, it’s hard to see how you can plan to get there with the confidence that you will have enough money.
If you are in a couple, be honest with each other about what you both want out of your present and your future and what role money is going to play in that. Take each other’s hopes and fears seriously and create a shared vision.
The beauty of financial success is that it is completely subjective. All that’s important is what matters to you, not to your friends or colleagues or neighbours or some celebrity on the TV. Their definition of a success will be different to yours.
If you want to spend your retirement pottering around the garden and going for walks in the local countryside, you’re going to need a lot less money than someone who expects to holiday in 5-star hotels.
You might not even want to retire!
Instead, maybe it is financial independence that interests you - the emotional and psychological freedom you gain from knowing that everything you do in life, including work, is being done on your terms.
This might mean leaving your main job and moving into a part-time or freelance role. Perhaps you’ll choose a vocation that will be more enjoyable, but less well paid.
Ultimately, though, the more you can understand your own ambitions, the more successful your financial journey is likely to be.
2 - GET FINANCIALLY ORGANISED
Your time is valuable. It is therefore in your best interest to find ways to reduce the amount of time and stress that you unnecessarily spend managing your finances.
Here are some ideas:
Put as many aspects of your finances as possible on autopilot
One idea is to set your ISA contribution up as a monthly direct debit. That way you won’t forget to do it or need to worry about the market timing aspects of investing a lump sum in one go.
Another is to use multi-asset funds that automatically keep your portfolio close to your pre-agreed risk level rather than you needing to keep track of everything.
If you are not a confident investor, you could appoint a financial planner and pass a large part of the burden onto them.
Diarise the renewal dates of any annual policies or subscriptions
You could easily miss important insurance correspondence and find that your policy wasn’t on auto-renewal and had lapsed, leaving you uninsured. Or, that it had automatically renewed, but with a 50% price hike.
Make a schedule of all your renewals and subscriptions.
Examples might be car insurance & MOT, gym membership, TV packages, buildings & contents insurance, internet, phone contracts and utilities like gas and electricity.
Diarise reminders about these renewal dates, giving yourself time to research the best alternative or to decide to cancel.
Declutter
Not only can decluttering save you time and stress, but it can also save your loved ones the pain of having to trawl through your paperwork if you weren’t around to guide them.
Having seven bank accounts, six ISAs and five pensions is unlikely to be helpful.
Start closing small bank accounts and consider consolidating investments and pensions. But, make sure you wouldn’t suffer penalties or forego any valuable guarantees.
Shred unnecessary paperwork. You don’t need a lifetime of records.
Make sure that your digital records are just as organised as your hard copy records.
3 - PLAN FOR THE BEST BUT PREPARE FOR THE WORST
Whilst it’s not something that any of us would like to dwell on, making sure that you and your family are well protected should misfortune strike is an extremely important part of any household financial planning strategy.
Wills
If you don’t have one already, you should make sure that you have an up-to-date Will. As well as formalising your wishes and avoiding ambiguity, it will reduce stress and speed up the administrative process for your loved ones should the worst happen.
Pension nomination of beneficiary
On a similar note, check that you have completed a nomination of beneficiary form (sometimes called an “expression of wish”) for your pension funds.
Pensions don’t generally form part of your estate on death (due to change from April 2027) and so are not covered by your Will. To avoid ambiguity and delays, tell your scheme who you want to receive your fund.
Lasting Powers of Attorney
Consider putting Lasting Powers of Attorney (LPAs) in place if you haven’t done so already.
If you lose the capacity to make financial decisions, your spouse or other loved ones won’t be allowed to deal with your money without formal authority in place.
There are two types of LPA - a Health and Welfare LPA and a Property and Financial Affairs LPA. You can have one or both.
Accessible cash buffer
No matter how financially organised you are, the probate process can still drag on. If you have a spouse or partner, the household bills will still need to be paid in the meantime. Therefore, make sure that they have a bank account or ISA in their own name, so they have ready access to sufficient money.
Life insurance
If you have family who depend on you financially, life assurance is often a very affordable way of ensuring that they are well provided for should you die.
Have an honest discussion with your partner about how you would each want to be provided for should the worst happen.
Itemise what insurance you already have (you may have a personal policy or ‘death-in-service’ insurance through work) and, if insufficient, apply for additional cover.
Keep this under review as your circumstances change (e.g. bigger mortgage, new child, commitment to private education).
Ill-health insurance
If your income stops, perhaps due to an accident or illness and you don’t have contingency plans in place, your bills will still need to be paid and things can unravel very quickly.
Income protection insurance (sometimes called permanent health insurance) and critical illness cover can protect you.
Your employer may offer these, so find out what cover you can access through work. Then consider filling any gaps yourself.
Even if you decide not to pay for it, at least you’re making an informed decision.
Tell your next-of-kin
Keep an up-to-date record of your finances in a secure place and tell your loved ones where to find it. Talk it through with your next-of-kin and help them understand it. The usefulness of a will or an insurance policy is somewhat diluted if your family does not know where to find it, or that it even exists!.
4 - TAKE CONTROL OF YOUR PENSION
Pensions will often form a particularly important part of a household’s personal financial planning yet can often leave people confused. Here are some ways to take better control.
Work at whether or not you should pay in more
Look at what you are currently paying in and think about how much you can afford to save for the longer term. Try not to just rely on auto-enrolment default contribution levels.
Pensions can be one of the most tax-efficient ways of saving for your retirement. To get the most benefit from the system, your optimal contribution level may vary from year to year.
Take a bit of time to understand your income position because that determines how much you can pay in and what pension tax relief you can achieve.
It’s worth remembering that pension contributions can become increasingly attractive as you near the end of your career, partly because you are probably at your peak earnings level and partly because you are closer to the age when you can actually draw on the money, so it isn’t locked away for so long as for someone in their 20s or 30s.
Work out what you are paying in charges
Look at what you are paying in charges. Cost, the lower the better, is recognised as one of the key drivers of long-term investment returns, Fortunately, it is one of the variables of investing that you can control.
Make sure that you are not invested into expensive funds and, within reason, aim to pick from amongst the lowest cost funds available to you from your pension provider. If that still looks expensive, consider changing pension provider.
Make sure that you are receiving the tax-relief that you are due
Subject to certain limits, money that you pay into your pension attracts relief at your highest marginal rate of tax.
Yet many higher and additional rate taxpayers never claim this from HMRC.
Most basic rate taxpayers automatically receive the correct tax relief. But if you’re a higher or additional rate taxpayer, you may need to claim the additional tax relief from HMRC.
Don’t assume that this is automatically dealt with via payroll or your tax code. Check how it works on your employer’s pension scheme.
If you have missed out, you can claim back up to four years’ worth via HMRC.
Make sure you are happy with your fund choice
Having a target split of your assets between equities, bonds, cash and property (and staying close to it), will help you align your portfolio with your investment objectives.
Think of investing as a ‘whisky and water’ strategy. Cash and lower-risk bonds would be your water, which you would mix with the equities and other riskier assets to give the right blend for you. Compare your current portfolio with your target and top-up the whisky or water as necessary.
Simplify your fund choices to save yourself time and boost your understanding
You don’t need to own dozens of different funds to have a well-diversified portfolio. Reducing the number of holdings decreases the time spent on your finances, creating space for more enjoyable pursuits.
Check if your pension provider gives you access to very low-cost, multi-asset funds that spread your money globally across thousands of individual stocks and bonds whilst automatically maintaining your agreed risk level, so that you don’t have to think about it.
A FINAL THOUGHT
Even if you’re typically an optimistic and relaxed person, money decisions can still lead to stress and anxiety and detract from your overall feeling of well-being and happiness.
This can be improved by creating an action plan for your biggest financial concerns
Write down what keeps you awake at night regarding money and create a plan for each of them.
For example, dreading completing your tax return will create negative thoughts all year. Proactively noting down relevant tax information as you go along and filing it well in advance of the 31st January deadline would reduce these negative thoughts.
HAPPY CHRISTMAS
We hope that helps and wish you a happy, healthy and prosperous 2025.
PS
If you fancy an easy financial read this Christmas, The Psychology of Money by Morgan Housel gives a fantastic perspective on money and financial decisions.
The value of your investments can go down as well as up, so you could get back less
than you invested.
Tax and Estate planning is not regulated by the Financial Conduct Authority.