Smart spending tips to prepare for the year ahead

Sorting out your finances might not be the most exciting part of student life, but it’s one of the smartest moves you can make.

Whether it’s managing your student loan, saving towards a big goal or simply staying in financial control, forming good money habits now can make life easier further down the line.

When your student loan arrives, it’s normal to feel a sense of freedom. But that excitement can soon lead to overspending if you aren’t careful. Keeping track of your finances is crucial for staying in control.

Student spending is expected to soar in the first three months of 2025, driven by improved financial confidence. The arrival of January student loans, combined with a more optimistic outlook, is likely to result in higher levels of buying activity.

But it’s important to remember that poor money management can leave you short in the longer term. When your loan arrives in your bank account, you may be tempted to splash out on non-essentials. Managing your money wisely can help prevent stress when funds start to run low later on.

The new year is the perfect time to not only review your finances, but how you manage them too. Taking the time to budget, prioritise expenses and set some savings goals can make all the difference in ensuring financial security throughout the academic year.

Why does financial literacy matter?

Financial literacy is the ability to understand and apply financial knowledge and skills – from budgeting and saving to investing and managing debt.

Here’s why it’s important:

1. Builds financial independence

Understanding how to manage your finances during university empowers you to make informed decisions, avoid unnecessary debt and grow your savings. This independence sets the foundation for long-term financial health.

2. Reduces stress and improves mental wellbeing

Money worries are a major source of anxiety for many students. Learning to manage your budget effectively and plan for expenses can reduce financial stress and help you feel more secure about your future.

3. Improves decision-making skills

Whether it’s choosing the best student bank account, understanding loans or managing part-time job income, financial literacy helps you navigate financial decisions with confidence.

4. Supports future planning

Setting goals like travelling or furthering your education requires a good grasp of financial principles. By understanding budgeting and saving, you can achieve these dreams more effectively.

5. Prepares you for life’s uncertainties

Life is full of surprises, from unexpected bills to changes in circumstances. Financial literacy equips you to adapt to challenges and remain in control of your money. By developing financial literacy as a student, you can set yourself up for a secure and successful future.

The power of loud budgeting

Have you ever been in a situation where you’re uncomfortable talking about money? Loud budgeting is a TikTok and Instagram trend that helps you set financial boundaries by sharing how much you are willing to spend openly with the people in your life.

In a culture where many of us are uncomfortable discussing money, loud budgeting takes the awkwardness out of talking about financial struggles. For example, if a friend suggests going out to an expensive restaurant, you could let them know how much you want to spend and perhaps suggest somewhere cheaper.

If your friends and family know you’re saving up for something or facing extra living costs, they’re less likely to suggest expensive plans. Being honest about what you do and don’t want to spend your money on can make these conversations easier.

The confidence gap

Many young people are struggling with their finances because of a unique mix of challenges that have affected their financial confidence. In recent years the cost of living has risen, wages aren’t stretching as far, rent is soaring and buying a home feels out of reach for many.

When it comes to managing money, there’s a stark generational divide in financial confidence and knowledge across the UK. Surveys have revealed that a quarter of young adults in the UK have low confidence in managing money. Financial stress is also more common among younger savers.

The good news is that there are plenty of ways you can improve your financial literacy and confidence. It takes dedication and practice, but it’s a valuable investment in your future. Here are some ideas to get you started on your journey to a healthy financial future that puts you in control.

Tips to improve your financial literacy

Learn to budget

Creating a budget starts with understanding your income and expenses. List all of your fixed costs, like rent or bills and your variable spending, such as groceries or entertainment. This process helps you identify where adjustments might be needed. Online budget calculators can help uncover potential savings too.

Once you have a clear picture of your finances, set realistic financial goals. These might include short-term targets, like building an emergency fund, or long-term objectives, such as saving for a post-graduation trip, buying a car or saving for your first home.

Following a well-thought-out plan can help you manage your spending, reduce debts and prepare for unexpected expenses.

Talk to a finance professional

From picking the best account for your needs to mastering everyday budgeting, the right guidance can go a long way in boosting your financial confidence. Speaking to someone who understands your profession and specialises in its unique challenges can make all the difference.

A financial adviser with expertise in your field can help you organise your finances, create a clear plan and set achievable goals. Many firms also provide resources like workshops and online tools to equip you with the skills and confidence you need to manage your money effectively and reach your goals.

Stay informed

Staying informed about financial matters is vital to improving your financial literacy. Understanding the basics of financial management is essential and there are many resources available to help. Reading personal finance books and blogs can provide valuable tips and guidance, while financial podcasts from trusted sources offer insights from experts on managing money.

Newspapers and TV programmes can also give useful real-life examples and advice. The more you engage with reliable sources, the better equipped you’ll be to make informed financial decisions.

Stick to good financial habits

Building good financial habits puts you in control of your money and sets you on the path to achieving your goals. Start by saving regularly, even if it’s just a small amount each month – every little bit adds up. Avoid impulse purchases by pausing to ask if something is a need or a want, which can help you spend more mindfully.

It’s also worth keeping an eye out for ‘doom spending’, a growing trend where stress or anxiety leads to impulsive purchases that don’t align with your goals. Taking a moment to reflect before spending can help you avoid this trap and focus on what really matters to you.

If you’re starting work this year, download our Financial Survival Guide for practical tips on managing your money. It includes details on how much you can expect to earn, guidance on handling student loans, and a breakdown of the key expenses to prepare for. Plus, there’s a budget sheet to help you take control of your finances and map out your spending and saving.

By sticking with good habits, planning ahead and using the right tools, you’ll not only feel more confident about your finances, but also enjoy greater peace of mind as you work towards your goals.