This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign
Following a year of financial shocks and budget squeezes in 2023, you may well be resolving to start the new year with a new money regime. But what simple changes could yield the biggest financial return for the least effort?
FT Money Clinic podcast experts share four top tips below. Subscribe to the show for a (free) weekly dose of personal finance inspiration in the year ahead.
1. Master the jam jar method
Even the affluent need to budget. The jam jar method of separating money into different pots is as old as the hills, but it’s effective. It has also been given a digital update with the ability to create separate “pots”, “jars” or “spaces” within your online bank account, and automatically allocate separate sums into these on payday.
The tricky bit is setting up a system, but Twixtmas — the period between Christmas and New Year — is the ideal time to plan ahead.
“If you only do one thing, setting up a separate bills account can be transformational for your finances,” says Sara Williams, an experienced debt adviser who runs the Debt Camel blog and Instagram account.
After totting up your regular monthly payments, set up a direct debit to transfer your share to the bills account (couples with divergent incomes may want to think about the fairest ratio). Keep your fixed costs separate and it’s obvious how much you have left to spend, save or invest.
“I like to think of my savings as sitting in three separate jars,” says Timi Merriman-Johnson, a financial adviser better known online as Mr Moneyjar. “You have your emergency fund in an easy access savings account; a separate account for things you want to do within a year or two like holidays or a big life event, and then anything over and above that can be invested in the stock market for the long term.”
Williams also recommends setting up “sinking funds” for putting aside money monthly for annual expenses, such as renewing insurance policies, tax bills or even next Christmas — payouts that might otherwise be big pinch points.
If your mortgage fix comes to an end in 2024, start looking for a new deal up to nine months beforehand. Use an online mortgage calculator to get a sense of how your monthly payments could increase, advises Merriman-Johnson, and speak to a mortgage broker early in the process.
Financial markets expect interest rates to fall in 2024, providing respite for borrowers — but grab the best deals on savings accounts while you can.
2. Focus on the most important thing to invest in
Think beyond the stock market — your most important investment in the year ahead could be yourself.
“There’s only so much we can cut back,” says Bola Sol, a financial adviser and content creator. “Now it’s all about how we can make more money, make the most of skills that we currently have, or learn new skills.”
The benefits are bigger for younger groups, she says. “I’m paying close attention to what artificial intelligence means for us as millennials and Gen Zs, and how we need to upskill. We can’t get left behind.”
Merriman-Johnson says investing in yourself could be completing a course, gaining a qualification, trying public speaking, learning to code or even learning a language. He notes: “You could be one skill away from doubling your income.
“Once you’ve increased your capacity to earn, which then stays with you for the rest of your life, you can then invest more of that money into financial assets, your pension and so on.”
3. Prepare for political change
Next year promises a huge political moment on both sides of the Atlantic, but what could it mean for your money? Manifesto promises are likely to favour older voters, but experts urge the under-30s to become politically engaged and campaign for change.
“If you want to see changes to rules to do with renting, to do with the Lifetime Isa, to do with progressing in your career, then pay very close attention to the parties and individuals who are promising these things, and vote for them,” says Merriman-Johnson.
While investors could see a change of government, they should stay focused on the long term. “A good investment strategy should never change, no matter which way the wind is blowing,” says Damian Jordan, star of the Damian Talks Money YouTube channel.
“I’m a global index fund investor, and all that means is I just back that the world will keep turning. So I will continue to do that every month until I need the money, which for me won’t be for another 30 years or so. Whatever happens, I just stay consistent.”
4. Apply ‘sandwich theory’ to tough financial decisions
With so much pressure on budgets in the year ahead, Sol says setting financial boundaries for yourself is vital. “Four of my friends are getting married in 2024 and three of those are abroad, so I’m having to do lots of careful planning,” she says.
For this and other dilemmas, protecting your budget may well involve having to say no. Merriman-Johnson says “sandwich theory” could help.
“If you just say no to someone, they’re likely to argue back. So sandwich the bad news in between two more positive pieces of news. Start off by saying a positive thing — ‘thank you very much for inviting me to your wedding or stag’. Then insert the no — ‘I’m sorry I can’t make it’ — then round off with a positive thing — ‘but I would love to catch up with you’. This is a far more palatable way to receive a no.”
With the soaring cost of weddings, Jordan points out that couples may actually be relieved if you politely decline an invitation: “You’re thinking that they’ll be offended if you don’t come, but they could be thinking they’ll be offended if we don’t invite them.”
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