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Image / Agenda / Money

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by Nick Charalambous
13th Jan 2025

Financial expert Nick Charalambous shares how to take control of your financial future in 2025.

The start of a new year is the perfect opportunity to reassess your finances and cultivate better money habits. With the sense of renewal and optimism that a fresh year often brings, beginning with the right mindset and financial know-how can lay the groundwork for long-term success in managing your money. Knowing what steps to take and committing to them is half the battle.

Taking control of your financial future isn’t about striving for perfection from the start, it’s about making steady progress. By adopting practical habits and staying consistent, you’ll be well on your way to building a strong foundation for long-term financial stability. Whether your goal is to save for a mortgage, pay down debt, or simply gain more control over your finances, 2025 is your chance for a fresh start. The key to success lies in setting realistic and achievable financial goals.

Here are some financial intentions to help you build better financial habits and make 2025 your most financially successful year yet.

Review your finances regularly

Think of your financial plan as a roadmap for managing your money effectively. Whether we like it or not, money drives our daily lives, and we need to plan around it. Think of your financial plan as a way to stay on top of your money. It’s all about understanding what money is coming into the household, where your money is going and ensuring you’re not overspending each month. Start by tracking your income and expenses for the first month. Write down everything from groceries, bills, transport and even those subscriptions you might have forgotten about. Once you have everything laid out, you’ll see where you can cut back, whether eating out less or subscription cancellations you don’t need. Use tools like budgeting apps or simple spreadsheets to help you stay organised.

Reduce debt

High-interest debt, particularly from credit cards, can quickly spiral out of control. After the holiday season, many carry balances from gift-giving and celebrations. Before focusing on savings, allocate extra funds toward paying down this debt. Aim to pay more than the minimum payment to reduce interest costs. Set aside a portion of your income to pay off debt before you even start to save, as interest rates are incredibly high on these loans. The faster you eliminate debt, the more financial freedom and control over your finances you will have. If you’re managing multiple debts, consider the snowball or avalanche method. The snowball method focuses on paying off smaller debts first to build momentum, while the avalanche method targets high-interest debts to save money in the long term. Whichever method suits you, eliminating debt is a vital step toward financial freedom.

Segregate your savings by time

A common mistake is treating all savings as a single lump sum. Instead, divide your savings into three distinct “pots”:

Short-Term (0-3 years): Savings for immediate goals like holidays or emergency funds. Use high-interest, low-risk accounts.

Medium-Term (3-15 years): Investments for goals such as a child’s education or a future home purchase. Moderate-risk options, like investments with some insurance companies, might be suitable.

Long-Term (15+ years): Retirement savings or funds for your later years. Consider tax-efficient vehicles like pensions or investment portfolios.

The reason for distinguishing the monies into different “pots” is that various types of accounts depend on the time you are saving or investing. For instance, if you are saving to buy a house in the next two to three years, the only accounts you can save into are bank savings and/or deposits. These are no risks and lower returns than, say, for children’s education funds. Meanwhile, if saving for a child’s education is a decade away, you might consider options with slightly higher risks and returns. Put some of the money you have worked hard for into tax-efficient vehicles like pensions. Ensure your money is in the best place possible for the time you want to save.

Get the best return on your money

Find the best accounts for each category once you’ve organised your funds into three separate pots. Don’t leave your money in the post office, credit union, or traditional banks like AIB or Bank of Ireland. For short-term deposits, look to foreign online banks such as Raisin, Trade Republic and Bunq, which offer more competitive rates. The rates offered are generally over two per cent interest per year before tax. Take advantage of the current interest rate environment to help your money grow faster. As rates will possibly be reduced further in 2025, it is advisable to lock in some fixed-term deposit rates for your short-term savings before they get lower. Also, review your mortgage rate – if you switched or drew down in the past 2-3 years, you can likely change to a lower rate in 2025 and save money.

Increase your pension contributions

It may feel like retirement is far away, but the earlier you start, the better. Even small increases to your pension contributions now can make a big difference later, thanks to compound growth (which means your money earns interest, and that interest earns even more interest). If you don’t have a pension yet, 2025 is a great time to start – it’s never too late. Even small contributions will add up over the years. Don’t forget that there’s up to 40% tax relief on pension contributions. When you put money into your pension, you pay less tax and get this money back from the government. If you’re self-employed or working through PAYE, ensure you get the full benefit of this relief. If your employer provides a matching pension scheme, sign up, as this is essentially free money.

Claim your tax credits

330,000 PAYE workers overpaid their taxes last year, and a lot of this is because of missed opportunities to claim tax credits. This means that around a quarter of all PAYE taxpayers may have overpaid taxes last year and the year before. The new year is the ideal time to check your tax credits and allowances. You can go back to four years, but many people don’t realise they’re missing out on money-saving opportunities. For example, if you’ve started working from home, you might be eligible for remote working tax relief. Or if you’re renting, the rent tax credit entitles individuals to claim €1,500. Log into Revenue Online Service (ROS) or myAccount to check and update your tax credits. Ensure you claim everything you’re entitled to, like medical expenses or home carer tax credits. A quick update could mean you pay less tax this year.

The Rule of 72

Impulse spending can derail your financial goals. Before you embark on any purchase that isn’t essential, I suggest you use the ‘Rule of 72’. Wait 72 hours before deciding if you still want the item, then proceed. With the rise of social media ads, we are more at risk of impulse buying. I have been lured into these and found that if I don’t buy immediately but store them, I don’t proceed 3 days later. This is particularly relevant with January sales as we can be encouraged to spend with significant discounts but may not need the item and impulse purchasing.

Plan for the year ahead

Lastly, whilst creating a last-minute budget is possible, planning and saving earlier makes significant expenses more manageable when the time comes. Open a holiday savings account in January and contribute a small amount each month. You’ll have a dedicated fund ready to cover your expenses by December. For example, if you want to take a €2,000 holiday in the summer, save about €167 each month. By the time your holiday rolls around, you’ll have the money without the stress and continue this for more savings throughout the year.

Setting financial intentions for success in 2025

Building the proper habits helps create a foundation for long-term financial security, no matter the economic climate. Achieving financial success requires deliberate intentions, actions and a commitment to change. The key to achieving your financial goals in 2025 is consistency. You don’t need to make massive changes overnight. Start small with a simple financial plan and build on that as you go. Saving a little each week, reviewing your tax credits, and planning can make a massive difference. Success is not about perfection but about progress. Start small, be consistent and watch your financial future take shape. This journey to success will make you feel more in control and confident about your finances in 2025.

Nick Charalambous, Managing Director of Alpha Wealth, has worked in investment and private banking for some of the biggest banks in the world. With over 25 years of financial services experience in Cork, primarily as a financial advisor with AIB and Ulster Bank, Nick has built up an extensive knowledge of the financial services environment, which he shares with his clients in many areas of personal finance, alphawealth.ie.