New year, new finances: resolutions for 2023

This is an audio transcript of the Money Clinic podcast episode: ‘New year, new finances — resolutions for 2023’

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Claer Barrett
Everyone’s worried about money right now, but Money Clinic is here to help. I’m Claer Barrett, the FT’s consumer editor. Even if you don’t want to come on as a guest, we’d like to hear your ideas for money-related topics you’d like to learn more about on the show. Email us via money@ft.com, and let us know what’s on your mind.

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Forget the mince pies. Turn Wham! off the radio and stop unwrapping all those presents for one minute because I have got the ultimate Christmas stocking filler for you: a podcast episode packed with everything you need to come up with some financial New Year’s resolutions. The ultimate guide to help you kick your money habits into shape for the year ahead. Welcome to Money Clinic, the weekly podcast from the Financial Times about personal finance and investing. I’m Claer Barrett, the FT’s consumer editor.

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Coming up, three very special guests and personal finance experts who will be sharing their financial New Year’s resolutions for 2023. This episode is packed with ideas for how you can rethink your finances and advice on financial topics to watch out for in the coming year. With me to share their New Year’s resolutions are Iona Bain, the money expert and TV presenter who runs the Young Money blog. Hi, Iona.

Iona Bain
Hey there, Claer.

Claer Barrett
Timi Merriman-Johnson, who is better known online as financial educator Mr Money Jar.

Timi Merriman-Johnson
Thank you very much for having me, Claire.

Claer Barrett
And Sara Williams, who runs a blog and very popular Instagram account called Debt Camel.

Sara Williams
Hi, Claer.

Claer Barrett
Well, fantastic to have you all on the podcast today. Now, statistics show us that 35 per cent of people will make a financial resolution this year. As personal finance expert, starting with you, Sara, do you start every year with some kind of financial goal in mind as well?

Sara Williams
I think New Year’s resolutions are great because it’s good to have a look at your finances and decide where you want to get, not just how you’re gonna get through the next month but what do you want to happen for the whole of the year. So I think New Year’s resolutions are good. They’re even better, of course, if you stick to them. And so you need to make your resolutions about more than just January, and they need to be realistic.

Claer Barrett
Well, good advice there. Timi, are you setting yourself some financial targets for the year ahead?

Timi Merriman-Johnson
Definitely. So as a new-ish business owner, my, Mr Money Jar turned three this year. I feel like I’ve been treading water for the past three years and didn’t really feel like I had a lot of financial security, and the business didn’t necessarily know where the next bit of income was gonna come from. Now I’m feeling a bit more stable with that. I’d like to focus on growing my net worth through contributing to my pension and to stocks and shares, ISAs. So I’m sorted for the income side. Now, I’d like to start to build up some, you know, some good assets.

Claer Barrett
Well, I’m sure our many listeners who are self-employed will really be with you on, on that one. It can be very hard to, as a business owner, to prioritise these long-term financial goals. Iona, have you got some specific financial goals that you’re looking to achieve this year?

Iona Bain
Well, yes, I have one goal that is very similar to Timi’s. So yeah, I’m actually gonna be putting a lot more money into my pension over the next year or so.

Claer Barrett
Sara . . . 

Sara Williams
Yeah, I’ve got one specific goal for me, which is about my pension. And so I’m in my early sixties, and what I must do in this current tax year is find out my national insurance history and decide whether it’s worth me buying back some extra years of national insurance that they haven’t paid because it’s possible that for an outlay of a few hundreds now, you can get back quite a few thousands later on. I need to look into the details. I need to look at my own record. And the rules are changing in April, which is why I want to do it before then because after April you won’t be able to go back as far . . . 

Claer Barrett
Yeah.

Sara Williams
. . . by buying back extra years.

Claer Barrett
So check your state pension on gov.uk. Find out how many gaps you have. I might have to add that to my list. OK. Well, you all come into contact with very different communities of people through your work. Now, what are some of the main areas that you’re seeing people struggle with financially at the moment? Now, Sara, I’m gonna to talk to you first because obviously debt is an ever growing facts of life in the cost of living crisis. And I know that you have been incredibly busy over the last few months.

Sara Williams
It’s debt, consumer debt — credit cards, loans, catalogues, overdrafts — that sort of thing. But what’s even more important, this has been this year are bills. And they will be rising, and we’re all having to pay on energy and other bills because that reduces the amount available. You have to be able to clear those debts. And the looming problems since the summer has been mortgages, when mortgage fixes end. And that’s, we’re gonna have millions of people having their mortgage fix ending in the next 18 months and really struggling to afford the much higher payments they’re likely to have to afford. So for me, mortgages and energy bills are going to be the big story for next year.

Claer Barrett
And Timi, in the work you do, you do lots of events about financial literacy with young people, National Numeracy, you’re an ambassador for their charity, helping people to get to grips with a fear of numbers. What kind of problems are you seeing in your day-to-day life with people’s money?

Timi Merriman-Johnson
Yeah. So the thing with the cost of living crisis is that it really is around the cost of living. The biggest areas we’re seeing prices go up are around energy bills, food, petrol and that sort of thing. And so a lot of the questions I’m getting are around how to do more with what you have. Some really things that you can afford to like do without. So a lot of the things I’m talking about are ways to economise, halve your food shop waste, ways to heat up your house and use energy more efficiently, but to also do it in a way that doesn’t make your life miserable. So I think doing things that bring you joy and that make you happy, especially when times aren’t great, is also very important.

Claer Barrett
Hmm. Now, Iona, you come into contact with lots of different people in the course of your work with the Young Money blog and also with your different TV gigs. What would you add to what Timi and Sara have noticed?

Iona Bain
I am in my early 30s, and I think our generation have been used to low interest rates, relatively low inflation and an environment where, you know, there were certain kind of expenses, you know, that were part of everyday life that were, you know, relatively cheap and that we could justify. You know, there’s been lots of chatter about whether the, the millennial lifestyle subsidy is now gone and whether, you know, those kind of easy-to-use apps like Uber and Deliveroo, etc have had their day because now we’re in an environment where those kind of companies are gonna have a much tougher time making money. They’re gonna have a much tougher time offering their services at low costs.

Claer Barrett
So the “millennial lifestyle subsidy”, I’ve not heard that before, so this is paying for convenience. So things like Deliveroo having lunchtime, getting an Uber home, that’s the subscription economy as well, if you like. Things like that you think are gonna be very much on the wane?

Iona Bain
Yeah, I think so because I would characterise all those services as being something of a consolation prize in the modern economy. And I call them a consolation prize because they, they’re, they’re a substitute for, I think, the, the meaningful assets that the older generations I’d say overall have been able to acquire much more easily than the younger generations. So of course housing being right the top of the tree there. So yeah, we’re gonna see maybe a move away from, you know, enjoying some of those easy-to-use convenience services that came at low cost. And maybe people will be thinking, you know, much more about how they can, yeah, how they can reduce that, their debt and, and how they can live more within their means. And of course, that’s gonna be a really painful adjustment in the near term. But over the long run, I’m quite optimistic actually that that’s gonna mean that people will get back to remembering the stuff that really matters in their lives as well.

Claer Barrett
Well, Hargreaves Lansdown, the stockbroker, did a poll of its customers to find out what they wanted to do more of in the new year. And unsurprisingly, saving more was the top answer. But it was still quite a small percentage of people, just 12 per cent, perhaps suggesting that there’s not much slack in the budgets for people to put money aside, which is obviously gonna reduce financial resilience.

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Now, Sara, looking into 2023, we expect debt to be a problem for more people as the cost of living increases. You’ve been doing a series of posts on your Instagram account to help your followers get to grips with where they are now with their finances ahead of the new year starting. Tell us a little bit about your philosophy with that.

Sara Williams
Yeah, I think when you’re planning for next year, as I said, ambitions and hopes are great and realism is essential. You got to know where you are at the moment with your finances. So even if you’ve never actually written it out in detail before, it’s good to just write down what your income is, what your debts are, and what the balances are on the debts and what interest rates you’re paying on those debts are and whether any of them are ending. And also, look at your expenses. So look back over the last few months and see what you have actually been spending money on. Some of it may surprise you. Some of it may throw up things where you’re gonna say, I’m going to do less of that.

Claer Barrett
Now, Timi, you’ve also changed your approach to budgeting during the cost of living crisis. You’ve moved away from doing a monthly budget to doing a weekly one. Why is that so?

Timi Merriman-Johnson
So as prices started going up, I noticed that my monthly budgeting cycle was too infrequent. In the conversations I have had with people, they find the idea of looking at the past week of their spending far more palatable and much less overwhelming than going all the way back. You’re way more likely to remember what you spent money on last Wednesday, last Thursday, than the month before. And it’s a much smaller chunk of spending decisions, which frankly, you may or may not wanna reckon with. And then you can use that as a starting point to, to build and make tweaks and changes as you go along the way.

Claer Barrett
Now, Iona, are there any things that you’re doing differently with budgeting as the cost of living crisis changes things?

Iona Bain
So I’ve gone back to getting old fashioned paper receipts, and I put them on a spike in my office.

Claer Barrett
That is old fashioned (giggles).

Iona Bain
I know, I know. But then when I’m doing my budget, I go through them. And I can actually get a much more accurate picture of how much costs have gone up for particular items in a way that I just wouldn’t be able to if I was purely relying on digital budgeting tools.

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Claer Barrett
Now, Sara, some listeners might be carrying a bit more debt than usual. Right now we’ve seen a huge popularity of buy-now-pay-later over Black Friday, Cyber Monday and now Christmas. And some people might be worrying about how they’re gonna afford all of those repayments come 2023. Now, as a debt adviser, at what point would you say that debt becomes a problem, and how and when should people seek help?

Sara Williams
There’s some flags you should look for that show that is becoming a problem for you. If your, if your debts are going up, if your overdraft creeping up most months or you’re in it for more days of the month. If your credit cards are going up, these are all signs that you are not really getting your debts down. In any one month, there could be a very good reason for that. But if it happens for two or three months in a row, then probably your, you don’t have enough money coming in for what you’re spending. So either you need to rejig your budget and change that, and there’s a limit to what people can actually change. If you can’t easily change your budget to cut back, then the first thing to do is to talk to a debt adviser to get some help. Debt advisers are very good at seeing the bigger picture, and in some situations they may be able to suggest extra income you could get as well because there are millions of people in this country that aren’t claiming benefits that you’re entitled to. I hear pensioners say, “Oh, I wouldn’t be entitled to pension credit because I own my own house.” That’s nonsense. And people that aren’t claiming universal credit that could get it. People that are getting universal credit but aren’t claiming council tax support because they thought that was all included in universal credit.

Claer Barrett
Parents who don’t know about tax-free childcare. That’s what I’ve done on the podcast recently.

Sara Williams
Yeah, that, so there are a whole list of things which people aren’t claiming what they’re entitled to at the moment. And some of these can be really crucial because a lot of the extra help the government’s giving for cost of living support for energy bills next year is going to be tied to whether you’re getting some of these means-tested benefits. So even if you’re, the amount you can get paid from universal credit turns out to be really low, £10, £20 a month, that won’t transform your finances, but every little helps. But it will mean that you will be, get extra help from the government for cost of living help for energy next year. So it will get you, say, £900 extra help with your energy bills next year because you’re getting some amounts of universal credit.

Claer Barrett
Well, fantastic advice there. Now, let’s hear some of your financial New Year’s resolutions, things that you’re going to do in the year ahead. Timi, would you like to start?

Timi Merriman-Johnson
My financial resolution for the new year is to increase my net worth by contributing more to my pension and to buy stocks and shares, ISAs. And this is because for the last couple of years I’ve been focusing more on income and creating income stability. And now I’m feeling like I’m slightly close to where I want to be income-wise. I’d like to start investing more of that money so that I can actively increase my, my net worth. I’m still at an early-ish like life stage, and so I’d like to start compounding some of that money.

Claer Barrett
Iona, now you’ve told us about some of the things that you want to achieve in the year ahead, but you’ve got some other goals as well.

Iona Bain
Yes, I do. So my first position is to try and pay off my mortgage as soon as I can, both the financial and psychological reasons because I think the past few months have been a really scary reminder that, you know, relying on debt long term can make you very vulnerable if the economic outlook changes. And unfortunately, we, we’re in a country now where lots of people are having to, you know, rely on debt just to pay for the essentials, as I know Sara will testify to. I am fortunate in that, I think, I don’t have to be in that position long term. And I really don’t want to spend the rest of my working life worrying about what the Bank of England will do next. I want to get off that ghost train as soon as possible.

Claer Barrett
Umm, it’s a very big goal, though, paying, pay, paying off, off a mortgage. How are you gonna, gonna tackle that just by looking at a mortgage calculator, increasing your contributions bit by bit because the big sort of swing is how much money do you want to put into paying down debt and how much money might you denude from pension savings and, and investments, which I know you’re also very keen on? How do you strike that balance?

Iona Bain
It’s definitely going to be a tricky balance to strike in the first couple of years. So there’s this logic that if rates on cash are higher than the rates that you pay on your debt, then you should be saving more than you should be trying to pay down your debt. But I just feel like that perspective neglects the opportunity cost of prolonging the life of your debt, missing out on the extra saving and investing and lifestyle opportunities that are possible once you’re mortgage free. So I definitely feel that once I’ve, maybe not completely paid off my mortgage, but certainly, you know, got it made significant inroads into it, then I’m gonna supercharge my pension saving at that point, and hopefully then, you know, I’ll be able to, you know, make up for the last time particularly because I wasn’t able to do that in my twenties. So yeah, that’s a massive goal of mine.

Claer Barrett
And can I, at risk of hoisting my own petard, could, could I give you one tip on the mortgage overpayment and savings which you may already have thought of? Now, obviously, you can overpay your mortgage month by month, but if your lender allows you. But you could also put the money into a regular savings accounts. There’s no need to pay off the mortgage straightaway if you’re on a fixed term. You could get up to 7 per cent on the most generous regular savers applied monthly, of course, not annually. And then when you come to the end of the year, depending on the limits of what you can pay off in one go on your mortgage, you could transfer all of that money or you might want to take a little bit of it and put it into your pension before the tax year ends. It just means that with the interest, you have a little bit more than if you’d paid it down at the point of sale, as it were. How about that?

Iona Bain
That is, that is an excellent tip, Claer. I think I’m going to nick that (laughter).

Claer Barrett
Nick away.

Iona Bain
I’ll do exactly that. (laughter)

Claer Barrett
Now, finally, we all know that New Year’s resolutions are much easier to make than to stick to. I’m going to ask you all, starting with Sara, what’s your advice for actually sticking to the financial plans that you’ve set out for yourself in 2023?

Sara Williams
One thing I think can help a lot of people is if they can make what I call a “road map”. Draw up, literally, January, February, March and put in what you expect to be changing in which month. So you can see right from the start what you need to be saving up for. And you can see where the crunch points are possibly and what to be careful of. And you can plan for energy prices going up 20 per cent from April.

Claer Barrett
Excellent. Well, I really like the idea of the road map, and I might suggest that listeners answer that. The year anniversary of when you got your last pay rise. Get ready to put another one in. Timi, your advice for sticking to your financial plans.

Timi Merriman-Johnson
Yes, so if I use the analogy of training for a race because I’ve got one coming up in a few months, you don’t just run it all in one go. A big goal is actually just lots of little goals woven together. And then it’s a case of thinking about what do I need to do every day, week, month to contribute towards this goal? And then you put it into whatever time management system or habit tracker system that you, that you like listen to, that motivates you to take action. So again, going with the race analogy, I know that if I don’t put my runs in my calendar on my phone, then I’m just not going to do them. So whether you have an investing goal, a savings goal, even though it might be quite big and in the future, by breaking it down into smaller chunks of time, tracking that and celebrating that, you can chip away at it bit by bit.

Claer Barrett
Brilliant! Well, I’m stealing that. I’m going to start putting in my phone exercise. I think it’s a really, really good idea. Iona, do you have any final tips about how to make financial New Year’s resolutions easier to stick to?

Iona Bain
Yeah. I mean, all those suggestions, they’re absolutely fantastic. And I’ll definitely be using those myself, but also trying to build in rewards. If you are sticking to your financial goals, making sure that you have got a bit of money set aside for the stuff that you really love and enjoy because then, you know, it’s not going to feel totally grim and like you’re just kind of, you know, ploughing through and having no joy in your life. But at the same time, also being inspired by your goals and thinking like, “What am I doing this for?” Always thinking about the end kind of goal, not, not being I want to save money so that I have, you know, X amount in my bank account at the end of the year so that I have X amount more in my savings so that my mortgage is X amount less. It’s about thinking about what will I be able to do with that extra money. And even if it’s something as simple as well, you know, I feel as if that will just be a great weight lifted off my shoulders. For instance, you know, Sara’s been talking about how you can pay down your debt. Following inspiring, you know, influences online who’ve paid off their debts — that can really help you keep your eye on the end goal and help you understand what you’re doing it for.

Claer Barrett
OK. Well, an absolute wealth of tips there from our three experts on the podcast today. I really hope that you have found something in this episode that you can take away with you and use to motivate you in 2023. Do keep in touch with us. Let us know how your financial plans are working out for the new year. And may I wish you all a very, very happy and hopefully prosperous year in 2023 although we know there may be trouble ahead. Thank you very much to Sara Williams, to Timi Merriman-Johnson and Iona Bain for joining us today. It’s been a pleasure to have you.

Timi Merriman-Johnson
Thank you for having us.

Sara Williams
And a very prosperous new year to everyone.

Iona Bain
Agreed.

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Claer Barrett
That’s it for Money Clinic with me, Claer Barrett, this week. And we hope you enjoyed what you’ve heard. If you did, spread the word and leave us a review. We’re always looking to chat with people about their money issues for the show. If you’re interested in being part of a future episode and looking for some expert money advice, or if you just have an idea of a topic that you’d like us to tackle, then email us money@ft.com. You could also take a peek at our website ft.com/money. Grab a copy of the FT Weekend newspaper or follow me on Instagram, I’m @ClaerB. Sara is @debtcamel. Timi is @mrmoneyjar. And Iona is @ionajbain.

Money Clinic was produced in London by Persis Love. Our sound engineer is Breen Turner, and our editor is Manuela Saragosa. You’ve heard original tunes this week by Metaphor Music. And finally, our usual disclaimer, this Money Clinic podcast is a general discussion around financial topics and does not constitute an investment recommendation or individual financial advice. For that, you’ll need to find an independent financial adviser. That’s all the small print for now. See you back here soon. Goodbye.