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?

Do you have any you'd recommend?

And god only knows what current plan I'm in for my pension. I have to put them all in one pot as I have some with nest, some with people's pension, and some with Argon. My employer decided to switch to Scottish widows so that's my current provider.

£5k/m income and £400 mortgage is pretty good going.

You have masses of capacity in your budget for saving.

Just start putting £1k into an S&S ISA as soon as you are paid.

You should aim IMO to have 6 months expenses accessible for emergencies eg if you lost your job.

Make a budget for the year, including all needs and wants.
Include savings in your needs.
Savings should be of 2 types: long-term (rainy day/retirement money - no plans to spend) and short-term (save to spend).
Long/term savings a mixture of pension and investing.
Short-term savings for house, car, holiday, etc annual expenses or a bit more eg to save for a new car over 4 years, say.

Its very easy then: just set everything to go off onto its various accounts a day or two after payday, so you don't accidentally spend it and it's always there when you need it.

Move money across to a savings account every payday

That's more or less what we did for 2024, but then we decided to go to LA! The whole thing was £8k so it wasn't cheap.

I move the money to "savings" but we immediately know we can "afford" bigger spending.

Your pensions are pretty low. You need to pay into them now so they grow before retirement. I’d focus on the pensions.

If it were me I would be increasing your pension contribution (however it is that you manage it) and not overpaying on mortgage until you have some savings 🤷 with such a small mortgage I would be putting 30% of my salary into a savings account for the next year. (30% oh 50k is 18000, not including interest). Once that's built up, I would then attack the mortgage with salary (not savings).

in that case look properly at your long-term savings. Can you afford to do that every year even when you retire? If so, spend like water. If not, save it up until you can!
You need a balance but spending everything now and having no prospect of retirement or quality of life in retirement is not really the right balance.

Probably not? Who knows! I don't see myself travelling non stop when I retire, or we might retire to Mexico.

The whole plan is that in 5 years, we will move to London and buy a house that would take us eventually to a £1milion in assets. I'm fully aware my neglible mortgage will become big again, but that's part of the plan give or take. When we move to London I'll also be able to command a higher salary (£100k+) so some of that money will definitely go to a pension pot by then.

Once we retire, we downsize and either settle for somewhere cheaper like the Norfolk countryside or move to Mexico, where our money would definitely take us a lot further.

Well you're obviously comfortable with your plans and your rate of spending so not sure why you are asking for advice, really.

It's about creating the habit of saving some money, because obviously I have zero willpower around that.

Standing order is your answer. It will be the same as any other bill...

But we don't use debit cards at all only credit cards (for the avios).

So we'd have to stop using them (and collecting) all of those avíos for that system to work.

No you won't. Set up your savings on standing order on day 1 of the month.

Then pay your bills on credit card as normal.

If the spend comes out of your savings (save to spend NOT long term) just do a bank transfer to cover the relevant part of the spend once the credit card bill comes through.

That's what we've been doing though (and earning some tiny interest) but then we think we can afford x,y,z and go ahead and spend it.

So unless we created a completely untouchable account I find it slightly more difficult to work.

The issue here isn't budgetting then, it's a complete lack of will power.
The only way to combat that is to save into a pot that can't be touched. The obvious one being pension. My S&S SIPP has returned me 52% over 3 years so I dump everything I have into that. I'll add that, as a higher tax payer, you are massively missing a trick with regards to saving via a pension - it's very tax efficient as you'll be able to claim back the high rate. That will be received by you as a lump sum annually -last year my husband and I (who live very frugally) received £8k between us (we're both higher rate earners). That went into our main account for general use, giving us a solid boost. It took us a year or two of being tight, so we could maximise our pension contributions. But, it's effectively free money so crazy not to be maximising it, at least for your income.

So the tax back is actually received as cash?? I always thought it went to the pension.

We have always received it as part of our wider tax refund, in cash. That's just the additional 20% at higher rate though, not the initial 20% that everyone gets on all their contributions. We saw an advisor the first time of doing it, to ensure we were doing it correctly. I'd recommend speaking to a tax specialist

It sounds to me like you just need to decide what's most important to you and approach your finances in a disciplined way. You shouldn't ever 'think' you can afford something. It's really quite simple, can you afford it? yes or no.if the answer is no then you have to wait until you can. 🤷 (Said by someone in their 20s, single mum, never earned more than £32k pa, no inheritance or handouts, no debts and £50k in savings)

It's not a "think" I believe it's more around the subjective concept of "how much do I need in savings" type of thing.

To me, it is "would I need to get into debt for this?" Or for bigger ticket things, "is there a way I can pay this on 0% and have the money when the term ends?"

The LA trip was a situation like that. We ended up that way. We paid in full and have all the spending money before the trip. No interest paid. All in all (because I forgot about the Disney tickets) it's £10k.

I feel proud of that one TBH.

I have an odd attitude towards money too (I think) because I was underemployed for a few years (before I was made redundant) then got back on my feet. I then went through another redundancy (with no savings) and it wasn't necessarily the end of the world. We had a much bigger mortgage too, so in 2024 I took a massive breather and upgraded my lifestyle, but then I understand that I've had a nice "relaxing " year and maybe I should get back on trying to build a healthy financial future (without sacrificing much of my lifestyle).

I was just responding to this, where you said you think you can afford things you can't. 😊