As most people grapple with a troubling economic landscape and the ongoing cost-of-living crisis, saving has become a formidable challenge. The onset of a new year especially taxes household budgets, which are already strained from holiday expenditures and compounded by winter’s heightened costs.
Fresh data involving more than 2,000 workers has revealed top financial worries for the year: failing to amass adequate emergency savings (40%) and inability to save sufficiently for the future (38%). WEALTH at work, experts in financial wellbeing and retirement planning, have shared advice for fortifying one’s fiscal health, reports the Daily Record.
Jonathan Watts-Lay, director at WEALTH at work, said: “Many people don’t recognise the importance of financial resilience until something happens which highlights how vulnerable their finances are. Hopefully the five steps we have outlined will help those who want to take control of their finances and put themselves in a more secure position in the future.”
Watts-Lay also sheds light on the beneficial role employers can play: “Many employers now offer their staff financial education and guidance including workshops, digital tools and helplines. This can help them understand some of the key issues to help build their financial resilience in the future. Topics can cover a range of financial matters such as debt and money management, managing savings and retirement. Speak to your employer to find out what support is available.”
Five tips to build financial resilience in 2025
1. Make a financial plan
Your individual circumstances will dictate your financial priorities, which can vary depending on your life stage.
For some, the priority may be saving for a deposit for a first home, while for others it might be saving for retirement or paying off debt. Many people avoid dealing with their finances, but knowing what you’re saving for and creating a plan to achieve it is a simple yet effective way to reach your goals.
Setting up an automated payment can be beneficial, as if the money is automatically deducted from your account each month to pay off debt or go into a savings account, it becomes part of your monthly expenses.
2. Start with the basics
Many people find it difficult to understand basic financial matters.
A good starting point is to examine where your money goes, including everything from utility bills and insurance to food shopping and socialising. Taking a close look at your spending can often highlight areas where you could reduce expenditure.
A prime example of this is insurance, as it’s often possible to get a better quote by shopping around and using tools like comparison sites, but many people neglect to do this.
3. Research your work benefits package
Many employers provide a variety of employee benefits, including financial education, financial guidance, payroll savings, ISAs and share plans. Through auto-enrolment, many individuals contribute 5% of their salary to their workplace pension, with an additional 3% employer contribution.
However, they might not be aware that some employers will also match any extra contributions (up to certain limits). A person in their 20s could boost their pension pot by 25% by saving just 1% more if their employers were to match this.
It’s important to find out what your employer offers and which options are right for you.
4. Good vs bad debt
Understanding the difference between good debt and bad debt is another crucial principle. For instance, a mortgage is considered good debt – it’s sensible to have a loan to own your home as it provides a stable, manageable approach to long-term borrowing.
Nevertheless, it should still be reviewed occasionally to ensure you’re getting a good deal.
On the other hand, high-interest debts such as payday loans and credit cards can spiral out of control if not repaid promptly. Paying off bad debt should always be a priority.
For example, a debt of £3,000 with an 18% APR could take 10 years and 10 months to pay off if paying £52 a month, resulting in total interest payments of £3,836.
If the monthly payment was raised to £100, the debt would be cleared in 3 years and 4 months, with only £1,011 paid in interest. If this was further increased to £325 a month, the debt would be settled in just 10 months, with a total of £253 paid in interest.
5. Set up an emergency fund
Building an emergency fund is crucial for financial resilience. A lack of savings can have severe consequences, something many people realise too late.
Ideally, you should have between 3-6 months’ worth of savings that can be accessed quickly in case of job loss, illness, or unexpected expenses such as boiler replacement or costly car repairs.