Financial planning for next year

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We're trying to find a balance for next year. We're in good standing (financially) as in that we don't owe money beyond our small mortgage (£400) but we don't save any savings either!

However any "emergency" of up to £500 can be easily absorbed without causing any issues.

The savings have become less of an issue as one salary can cover all of our basic outgoings

We do get into big projects, last year (2024) alone we did the floors, bought a Peloton, and went on a few breaks plus bought two holidays (Sweden + LA) . I also bought a couple of designer items.

As a new year's resolution we've decided to only spend if we have actually saved the money rather than a mastery of spreading the cost.

I guess it has ended up OK as like I mentioned we're in no debt.

So how would you do it, just wait until we save?

Yes, just wait until you save and then, crucially, don't spend all the savings on short term stuff. Invest some for the long term. Overpaying the mortgage is as good a place as any.

We have a very small mortgage, and our goal is to take it down to £50k in the next 5 years, which seems absolutely doable. (We already overpay every 2nd of Jan ).

So if you overpay on the 2nd january do you already have that money set aside or do you treat it as a big bill once a year?

Buying a peleton and trip to LA when you have zero savings is slightly mad to me.
I would save into two pots, one for fun things and one that you don't touch for the future.

with no debt and a small mortgage you are doing well reallly.

If you are under 40, get yourself a lifetime isa and save into that. The government adds 25% interest but you can’t take it out until you are 60. Then I would carry on booking your holidays, as if you are a spender (I am too, no judgement!) going to 0 will be unobtainable. Instead try to shave maybe £250 a month from other spending to stick into premium bonds?

A mix of both, but we don't have a set goal it's just whatever is left in the pot, and whatever we think we "spread" for the next couple of months.

Yes there is NO way I won't go on holiday, they're my raison d'être!

On a month to month basis we actually live quite frugally, BUT we tend to spend on random "one offs" like: concert tickets (for the DC and us - total of £700), random collector/designer items (added up to around £1800).

Look into doing some more investing. I have one shares in stocks account that’s generating 16.9%. Where is my Mortgage is 4.1 I’m not going to miss out on 12% growth to save 4.1% interest charges.
Most ISA’s are hovering around the 4% Mark but there might be a couple of low risk investments that would give you five or six if you don’t have the appetite risk

If I had say £12k in savings I think I'd put £6k in low risk and then £3k in the other two tiers.

Sadly we still haven't reached that stage yet.

We just have a fairly average joint income (£5k net pcm) with fairly low overheads £2250).

Where are you pension-wise and are you close to income tax thresholds?

Might be worth putting some in there for future then some for fun stuff (like you, holidays are a must-have for us!)

The only way you get to having £12,000 in savings is To Be putting £50 in one account one month and £50 in the other account the next month and £100 in the account the month after.
I didn’t wake up one morning with 12 grand

I'm on £70k , my DH is on £30k .

We put the bare minimum in our pensions because we see downsizing as our pension for for now. Once I hit £100k (which I do plan to) we'd put more into our pension

How old are you? That changes what you might need in savings or pensions

I'm 40! Plus I'll get an inheritance of at least £200k at some point

Inheritance is not guaranteed. At that age you really need to put more into your pensions

Hmm. In that case I wouldn’t overpay the mortgage, I’d seriously think about pensions right now

This one is for all terms and purposes guaranteed.

There's not much point in saving until you can afford something if you're just going to blow the savings on designer items. Just decide on a suitable amount to genuinely save without touching long term, then use the rest for your discretionary spending. Also, think twice about overpaying your mortgage - if you're on a low interest rate, you may be better off investing that money.

We're on 4.4% so the faffing around to get an extra £3 is not worth it (IMO).

That's the thing, I don't really know what's suitable, because I want to keep my quality of life more or less the same (I'm definitely not planning on buying any more LV/Gucci items next year) but I still want to go on holidays and have a meal out like twice a month.

As soon as you get paid stick £1000 in savings , I use premium bonds and then in new tax year transfer into ISA - it’s accessible from PB’s within a day or two but feels locked away if that makes sense

Well, add up how much you spent on non-holiday luxuries this year, divide that by 12, put that much away on pay day every month

Thanks that's definitely a great way to look at it!

I have to pay my savings on payday or my money just disappears

You could use a high interest savings account with ‘pots’ for the different items. 1. Emergency fund 2. Holidays 3. Home improvements 4. Experiences.

It might make financial sense for you to put more into your pension, even with the inheritance, if you are on a defined contribution scheme. As soon as you put the money in you get 40% tax added to your pension. You can still afford holidays, which you really value - in fact you can have more holidays because you’ll have a bigger pension/be able to retire earlier.

Ok, on your income and the low mortgage costs, you can afford to still go on holiday and save. I wouldn’t stop everything as there’s no need, you can afford it, and it’s hard to live very frugally if you don’t have to. So I would put aside the holiday money and still go on one holiday each year (cut down to 1 decent holiday if you usually go on more), and set a budget for spending money each month. Every to big else after bills paid gets split between long term investments plus pension, and short term savings. Pension at your age is important so don’t think.