The start of the new year is synonymous with the promises we make ourselves to improve every aspect of our lives, be it the physical, the professional, or the financial.
So, this year, why not kickstart your resolutions by creating a budget that not only supports your immediate goals but also keeps your long-term objectives on track?
By creating and sticking to a budget, you can take control of your finances and pave the way for a successful and prosperous year ahead, while building a strong foundation for your long-term financial security.
Read on to discover four simple steps for creating your budget for 2025.
1. Work out your net income for the year ahead
The first step in creating a budget for the year ahead is to work out what your net income will be.
Your net income or “take home pay” is your salary or earnings after deductions, including taxes, pension contributions, and student loan repayments.
If you’re employed and receive a regular pay cheque, you can typically find your net income listed on your most recent payslip. If your salary is likely to be the same throughout 2025, then simply multiply that figure by 12. If you expect it to change, then be sure to factor the potential changes in too.
If you’re self-employed or a freelance worker, determine your average monthly income from 2024, factoring in any deductible expenses. Now look to the year ahead and work out how similar your earnings are likely to be based on the work you have already agreed.
While this may not be fully accurate, it should give you an approximation of what your net income will be in 2025.
2. Estimate your projected monthly expenses
Next, it’s time to explore how you are likely to spend your income.
Start by reviewing your bank and credit card statements to get a clear picture of your monthly spending.
Breaking this down into categories can make it easier to analyse. Many online banking platforms or mobile apps offer tools to track and categorise your spending automatically.
Begin by listing your fixed expenses – those costs that generally remain consistent from month to month. These typically include outgoings such as rent or mortgage payments, utilities, and transport costs.
Then, look at your variable expenses, which may change based on your activities and habits. These might include groceries, dining out, entertainment, and travel.
3. Create a spending and saving plan based on your goals
Once you understand your income flow and spending patterns, look for places where you can cut back and free up money to put toward your financial goals.
See if there are any areas where you overspent last year or in the last few months and how far off your savings targets you were.
To stay on track with your goals, prioritise needs and savings. As soon as you receive your income, pay for essentials first, set aside your savings, and then budget the remainder. You might allocate this for spending on “wants”, to ensure you can enjoy yourself without straying from your financial plan.
Once your spending is under control, try to align your savings goals with your long-term objectives. Think about what you want to achieve in the coming year and beyond. Perhaps you want to build an emergency fund, save for a home, or put away more for your retirement.
It’s also a good idea to decide how to allocate your savings based on these goals. For example, you may want to contribute more to your pension or max out your ISA Allowance. While cash savings are helpful for maintaining accessible liquid funds, consider exploring investment opportunities that may offer better growth potential.
4. Review your budget along the way
Budgets can change. So, after calculating your budget, it’s useful to review it regularly to ensure it remains realistic and keeps you on track to achieve your goals.
For instance, your income could grow following a promotion, or your expenses could increase if you move or start a family. You may achieve one of your goals and want to set new priorities.
To adapt to these changes, it can be a good idea to periodically assess your budget. Be consistent during each review to ensure your financial plan continues to align with your evolving goals and circumstances.
Get in touch
From analysing your income and expenses to setting achievable savings targets, a financial planner can help you at every stage of your budgeting journey.
They can work with you to create and implement a tailored budget that aligns with your goals. With their guidance, you can stay on track to achieve your ambitions while still enjoying yourself along the way.
To speak to a financial planner, get in touch.
Email info@blueskyifas.co.uk or call us on 01189 876655.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.