In the current economic conditions, with increasing living expenses, economic uncertainty, high interest rates, and unwavering inflation, establishing and sustaining financial situations is more crucial than ever. Most of us are weighed down by debt, inadequate savings and financial insecurity, primarily due to the strategies that we take on that are poor in providing financial stability.
Introduction
Recent statistics on the same show the gravity of the situation, for example, in September 2024, average UK debt was about £66k, which includes mortgages, loans, and credit cards. And the average adult unsecured debt, that is the debts not backed by collateral, such as credit cards, personal loans, or overdrafts, was £4k on average. This data talks about the importance of good money management.
This article provides a step-by-step, in-depth methodology for improving and reaching your financial goals, which can be applied at various stages of financing for life, considering you are an entry-level professional beginner, a parent who is saving for your child’s college education, or a person saving for retirement.
The following techniques will help build financial stability and sustain it in the long term.
Step 1: Assess Your Current Financial Situation
Before setting any financial goals, you must understand where you stand in the ladder. Start by listing all your income sources, including your salary, freelance work, and other side hustles.
Then, track every single expense for at least a month—this includes everything from rent and bills to coffee runs and subscriptions. Most of us are surprised to admit how much we spend on small, unnecessary purchases and shocked by all the unused subscriptions that add up to make a dent.
Once noting down the incomes and spending, calculate the net worth by subtracting your debts (credit cards, loans, mortgages) from your assets (savings, investments, property). If the number is negative, don’t panic—this means now is the time you need a solid plan to turn things around.
Create a balance sheet to compare what you own (savings, property, investments) against what you owe (debts).
Example: If you have £10,000 in savings but £15,000 in credit card debt, your net worth is -£5,000.
Step 2: Use the SMART method to define your financial goals
SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound.
Set a monthly target and stick to it. An unclear goal, always thinking to save money, doesn’t work. Instead, take SMART action by saving some amount monthly. This will give you a clear target and also quietly train you to start saving up in a disciplined manner.
Research shows that people who create SMART goals are far more likely to follow through with the plan as they know the exact numbers they are working toward. For example, Sarah, a freelance designer, set a SMART goal to pay off her student loans within two years after her academic years.
By automating monthly payments and cutting down on non-essential spending, she cleared her debt with a strict yet clear plan five months early.
Step 3: Prioritisation
Once you’ve set your goals, the next challenge is prioritisation. Most of us have multiple financial objectives—paying off debt, saving for a house, building an emergency fund, investing for retirement—but trying to do it all at once results in major burnout. If it’s not burnout, it’s the lingering dissatisfaction that comes from moving too slowly.
The key is to focus on one major goal at a time while making smaller contributions to others as and when possible. It is always a good idea to tackle high-interest debt first, since credit cards and payday loans can have interest rates of 20% or more, and they become a financial drain.
After that, focus on building an emergency fund (ideally 3-6 months’ worth of living expenses) before moving on to long-term investments. James, a teacher struggling with £15,000 in credit card debt, used this strategy to pay off his highest-interest card first, saving himself over £5,000 in interest payments over three years.
Step 4: Structured financial plan
Once your goals are prioritised, developing a clear and structured financial plan is next. This involves breaking each goal down into smaller, actionable steps. To save £20,000 for a house deposit in four years, you’ll need to save around £417 per month.
To make this easier, automate your savings so the money moves out of your account before you can spend it. Budgeting apps like YNAB or Emma can help by tracking your spending and alerting you when you’re off track.
Another useful strategy is the 50/30/20 rule: 50% of your income goes to necessities (rent, bills, groceries), 30% to wants (dining out, entertainment), and 20% to savings and debt repayment. If you’re struggling with debt, consider consolidation or balance transfer cards to reduce interest rates.
Step 5: Regularly Access and Review Your Goals
Even the best budgets require check-ins from time to time. Life happens—job loss, surprise expenses, or even good things like promotions—can all affect your progress. Make a habit of reviewing your finances every three months.
Ask yourself: Are you meeting your savings goals? Have your expenses changed? Do you need to shift your timeline? For example, getting a raise allows you to contribute more to your savings, helping you achieve your goal more quickly. Conversely, if an unplanned expense arises, it is better to push back the deadline instead of quitting altogether.
Flexibility is the key here—financial planning is not about a perfect budget plan, but about making consistent advancement.
Sustaining the motivation to reach financial goals can be one of the biggest hindrances in financial planning. It’s natural to get discouraged if progress is slow. To ward this off, employ behavioural methods that keep you active.
Plugging your savings and debt into automatic payments erases the impulses to spend money elsewhere. Word of mouth also works—subscribe to online forums such as r/UKPersonalFinance where folks exchange advice and share success stories. Visual tracking is another effective strategy.
Watching a graph of your debt falling or your savings rising over months or years can be very encouraging. Moneybox or Plum-style apps give these types of reports, which can help you stick to them.
Obstacles will happen, of course. Perhaps you lose your job, have a medical crisis, or inflation raises your cost of living. The most effective way to prepare for these setbacks is through an emergency fund—without it, surprise expenses can push you further into debt.
If you’re having trouble with motivation, experiment with “temptation bundling”—treat yourself to a small indulgence after reaching milestones, such as buying a small luxury after paying off £1,000 of debt.
And if you’re feeling overwhelmed, don’t be afraid to ask for help. Charities like StepChange offer free debt advice, and financial advisors can help tailor a plan to your specific situation.
In the end, financial success isn’t about making huge sacrifices overnight—it’s about making small, consistent changes that add up over time. By evaluating your present, establishing SMART goals, organising efficiently, developing a formatted plan, and checking your progress constantly, you can gain control over your finances and secure a safer future.
The path may not always be smooth, but the contentment that arises from financial security is worth it. Begin today, even with tiny steps, and eventually, those steps will result in actual, lasting improvements.
Do You Need a Friend to Set Financial Goals For You?
Are you bad at making financial decisions, or been in debt for a longer duration and not able to come out of that? Then, a full financial advisor can be your best friend. A financial advisor assesses your financial conditions and makes a strategic plan for you to make you financially stable. At InvestNMore, we connect people to top full financial advisors in the UK.
