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Like a row of falling dominoes, bettering one financial habit leads to the next, building momentum toward a stronger financial foundation.

The start of a new financial year is the ideal time to put this domino effect into motion; when it comes to saving and investments the key is to start with small, achievable steps, that in turn reinforce the next.

A great place to start is understanding where your money is currently going.  With the cost of living rising over the past few years, budgeting has become more essential than ever.  Small savings can add up quickly; cancelling just one unused subscription could save you up to £500 a year – money that could be allocated toward more meaningful financial goals, such as saving towards a big personal milestone, starting a family or preparing for retirement.

ISAs

With clear financial goals set and extra funds available the next step is understanding and maximising your tax efficient savings options.

Individual Savings Accounts (ISAs) are one of the best, tax free ways to grow your savings and investments.  For the 2024/25 tax year, you can contribute up to £20,000 into an ISA, protecting your gains from Capital Gains Tax (CGT) and ensuring that any interest or dividends you earn remain tax free.

If you are saving as a couple, you can contribute up to £40,000 across your ISAs, while Junior ISAs allow families to invest £9,000 per child annually, helping to build a strong financial foundation for both your future and your children’s.

ISAs are also highly flexible, allowing you to transfer funds between different types without losing their tax benefits.  Plus, new rules introduced in 2024 make it even easier to manage your savings by permitting multiple ISAs of the same type within a single tax year.

While ISAs are a powerful tool, pensions are equally important for securing your financial future.  However, a report from the International Longevity Centre UK found that 14 million working adults aged 45-60 save just £200 per month into their pensions, with a third at risk of not having enough to retire comfortably.

It is easy to lose track of, or even neglect your pension when juggling the rising cost of everyday expenses, but regularly checking in on your contributions and growth allows you to make necessary adjustments, which could make a significant difference for your future self.

Getting your ISA and Pension to work together

A balance between ISAs and pensions can provide financial flexibility.   A well-funded ISA can supplement your income or help with early retirement, while pensions offer significant tax benefits that support long-term financial security.

ISAs can also act as a buffer to reduce tax liabilities in retirement.  Since pension withdrawals (above the 25% tax-free lump sum) are taxable, withdrawing from an ISA alongside your pension can help manage income tax.  Pension contributions come with tax relief, so for example, if you are a basic rate taxpayer, a £100 contribution only costs you £80 and higher earners get even greater tax advantages.

The final step in your financial domino effect is securing your retirement and it is important to bear in mind that small changes now can make a big difference later.  Even increasing your contributions by 1% could add thousands to your retirement fund with minimal impact on your take-home pay.

If you have multiple pensions, consolidating them might simplify things but check your scheme for exit fees or lost benefits or seek guidance before making a decision.  Our team of expert financial advisers can help ensure your pension strategy is on the right track.

Each small change, spending smarter, saving consistently, reviewing your goals and investing wisely builds upon the last, leading to better financial stability.  By making informed choices and staying proactive, you create continuous momentum, setting yourself up for long-term success.  The first step is always the hardest, but once that first domino falls, the rest will follow.

Our professional guidance can make the difference between simply managing your finances and genuinely mastering them.  With our advice, you will gain clarity on your financial options and the confidence to make informed decisions.

Give our team a call today on 01228 711888.

_{David Allen Financial Services (Dalston) Ltd (Registered in England & Wales, Company Number 06966976) has its registered office at Dalmar House, Barras Lane, Dalston, Carlisle CA5 7NY. The company is authorised and regulated by the Financial Conduct Authority. Firm Reference 506138.}