Structuring an approach to saving / spending for 2025

[Howldens]

Hello wise ones!

I have never really budgeted. Just spent my income and never got into debt beyond mortgage (so no credit cards or other unsecured borrowing).

Rather belatedly I have decided to be more structured in my approach to my finances and I want to save for retirement but also save for shorter term goals eg for Christmas 2025 (so it’s not a huge hit in one month). If possible, I’d also like to allocate some money to experiences with kids eg days out - which as we all know are crazy expensive these days.

Thing is, I don’t know where to start & wondering if those who do have strategies in place would be open to sharing so I can start to think how I should approach.

I’m a single mum. After mortgage & other essential payments (bills), my disposable income is around £1,200 per month.

how would you structure saving if you were me?

I'd break down your disposable income, and create sinking funds for short term, predictable costs. I do this by figuring out my annual spend and dividing by 12. So for example every month I might put aside:

£100 Christmases
£100 Birthdays
£100 Holidays
£50 Clothing
£50 Car Maintenance/MOT/Unexpected Repairs

Then pots for regular monthly spending, for example:

£200 Fun Money
£100 Days out with kids
£100 Eating Out

And then see what you have left. Make sure you create a budget for every annual expense you'd normally have come out of your 'disposable' income.

Once you've figured out what you have left, that can become your longer term savings. I normally transfer it to a higher interest account as soon as I get paid so I'm not tempted to dip into it.

Are you in a pension at work?
How old are you?
How old and how many DC?
Do you own or lease a car? If so, when will you need to upgrade?
Does the 1200 include food, uniforms, holidays etc? Or is it completely unallocated money?

I'd stuff loads into a work pension.

Have you got good insurance cover for ill health or redundancy?

I'd calculate how much I spend each year on Christmas and then save 1/12th every month in an easy access account.

I'd look at what sort of holiday I'd like and then save each month so you have enough to cover the cost (including passports, insurance spends etc) on departure day.

I'd do the same with school costs (uniforms, trips, extra curricular etc).

And I'd save a good amount as a rainy day fund for if the boiler packs up, the car needs a new tyre etc.

Is your disposable income after pension payments? Worth looking how much you are paying into that and how much your work contributes

Check money saving expert site for best savings accounts, split your money between instant access, notice accounts and fixed term for your different requirements

This is very helpful already thankyou. I was trying to be cautious about giving away too much info but to answer your questions:

• I have been paying into work pensions until last April when I went freelance.
• I have been saving 50% of my income for my first tax bill, which will be due Jan 2026
• I have probably dipped into the above a little as psychologically I’ve seen it as savings - realised my error. Is now in high interest account until Jan 2026
• not making pension payments currently
• 45 yrs old - 2 DC (7 and 13)
• car - an old banger given to me by mum that runs well & just passed MOT
• £1200 would been to include anything that is not mortgage & bills so parts will be allocated for important outgoings such as school uniforms etc
• I do have cover for ill health but need to review it

hopefully this update is more useful. Thankyou very much to everyone who has taken the time to read / respond.

another vote for sinking funds. I use Chase and Zopa for mine as you can have multiple savings pots. I believe Starling also offer this, but I'm not sure if they still pay interest like Chase and Zopa do. We use them to save for big annual expenses (insurance renewals, car maintenance, xmas, holidays and longer term projects like major renovations / replacing our cars etc)

I have added the amount that I want to put in each month into the name of the pot so I always know how to divvy up the lump sum that I transfer in each month. You also need to get into the mindset of 'paying yourself first', i.e. you transfer money to your savings pots on pay day and live on what's left instead of only transferring over what's left at the end of the month.

If after funding these you still have spare money left over, look at a regular saver. You save between £25 - £300 a month for a year. You cannot withdraw the money until the account closes but you will earn a higher rate of interest

Further questions:
What are you doing about your pension now that you are freelance?
Do you have an emergency fund?
You mention ill health cover - what about holiday pay or periods of low income?
What about significant future expenses for the children - driving lessons / uni / deposit for property etc (I realise that not everybody is able to support this, just throwing things into the ring for consideration)
what is your plan for replacing the car when it dies?

Have you considered getting a cashback / reward credit card for your day to day purchases and treating it like a debit card (clearing the balance in full each month so that you never incur interest charges)? Whilst it won't make you an overnight millionaire, it's a bit of 'free money' towards days out with the kids.