As the New Year dawns, it's the perfect moment to give your finances a thorough health check. Simon Lambert, the esteemed editor of This is Money, has laid out a crucial seven-step financial MOT to help Britons navigate the economic landscape of 2025 and secure their monetary future.
The Essential Seven-Step Financial MOT
Lambert's comprehensive guide begins with a fundamental principle: knowing exactly what you have and where it is. This means gathering all your financial statements, from current and savings accounts to pensions and investments. Creating a simple spreadsheet or list detailing account numbers, providers, and balances is the critical first move towards clarity and control.
The second step focuses on pension consolidation. With many people accumulating multiple pension pots from different jobs over a career, tracking them becomes a challenge. Lambert advises using the Government's free Pension Tracing Service to locate lost pensions. Consolidating them into one well-managed plan can reduce fees and simplify retirement planning, but it is vital to seek independent financial advice first to avoid losing valuable guaranteed benefits.
Mortgages, Bills, and Building Your Safety Net
Step three tackles one of the biggest household expenses: your mortgage. Reviewing your mortgage deal is paramount, especially as many fixed-rate deals are expiring. Homeowners should check when their current deal ends and shop around for a new rate approximately six months in advance. Falling onto a lender's expensive standard variable rate can cost hundreds of pounds extra each month.
The fourth pillar of the financial MOT is a ruthless audit of your regular bills and subscriptions. From broadband and mobile contracts to streaming services and insurance premiums, these costs silently drain budgets. Lambert recommends using comparison websites to switch providers and secure better deals, potentially saving a significant sum annually.
No financial plan is complete without a safety net. Step five is all about building or bolstering an emergency savings fund. The goal is to have enough cash in an easily accessible account to cover three to six months of essential outgoings. This buffer provides invaluable peace of mind against unexpected job loss or major repairs.
Investing for Growth and Future-Proofing Your Finances
Once short-term security is addressed, step six looks to the future: consider investing for long-term growth. For those with savings beyond their emergency fund, Lambert suggests considering stocks and shares ISAs or contributing more to a pension. These vehicles offer tax-efficient ways to grow wealth over the long term, helping your money outpace inflation.
The final, often overlooked step is organising your financial 'admin' and planning for the worst. This involves ensuring your will is up to date, considering a lasting power of attorney, and making sure your family knows where to find important documents. It's a sobering but necessary task to protect your loved ones.
Simon Lambert's timely advice underscores that taking a proactive, organised approach to personal finance is not about drastic overhauls but systematic, manageable steps. By dedicating time to this financial MOT as 2025 begins, you can gain control, reduce stress, and build a more secure financial foundation for the year ahead and beyond.
