While some use it to tweak their lifestyle or try out a new hobby, it can also be a great moment to take a step back and check in on your finances.
Whether your goal is to clear high-cost debts, build a bit of breathing space with an emergency fund, or dip your toe into investing, you need to make a solid plan to get started.
Here’s how to manage debts and build savings in 2026.
Prioritise paying down debts
If you’re working toward a healthier financial position in the New Year, tackling high-interest debt should be your starting point.
Debts such as credit cards, buy now pay later (BNPL) and in-store credit often carry high interest rates. Left unmanaged, they grow quickly and drain money that could otherwise support your savings goals.
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Moneyfacts worked out that if you’re using a typical credit card charging 24.9% APR, a £300 balance with a £20 monthly repayment would take just over a year to clear and rack up about £55 in interest. But increasing that repayment to £50 a month would wipe out the debt in around seven months – and cut the interest bill to just £21.
Virgin Money was voted the best credit card provider in the 2025 Your Money Personal Finance Awards.
BNPL is sometimes advertised as a low-cost alternative to credit cards. Although borrowing can be interest-free if used correctly, this type of credit can also lead to difficulties. Missed instalments can trigger penalty fees, while spreading multiple purchases across different platforms makes it easy to lose track of what you owe.
If you have used BNPL in 2025, start off 2026 by listing every balance and payment date to make sure you don’t miss any payments.
Make use of balance transfer deals
If your credit score allows, a 0% balance transfer credit card can be an effective tool. These cards let you move existing credit card debt to a new provider, giving you an interest-free window for paying it off. Some of the most competitive offers provide 18 to 30 months at 0% interest, giving borrowers breathing space to reduce their debt.
“Taking time to compare different interest-free offers before applying is a good idea, especially to carefully examine any upfront fees,” says Rachel Springall, finance expert at Moneyfactscompare.co.uk, “Upfront fees get added to the debt that’s moved across via a balance transfer, so that’s worth keeping in mind when setting up the repayment.”
Consolidate sensibly
If you’re trying to keep track of several debts at once, a consolidation loan can make life easier. It rolls everything into one loan, giving you a single monthly payment and a clear end date.
But make sure the interest rate you’re offered is genuinely lower than what you’re already paying across your existing debts – otherwise it won’t save you money. And try not to take on new borrowing once everything is consolidated. The aim is to give yourself a fresh start, not to free up space for more debt.
Novuna was voted the best personal loan provider in the 2025 Your Money Personal Finance Awards.
Build an emergency fund
Once high-interest debts are under control, the next priority is creating a safety net. An emergency fund protects you from financial shocks – whether that’s a broken boiler, car repairs or a sudden drop in income. Without one, you’re more likely to fall back on loans or credit cards, which can restart the debt cycle.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “When you’re working age, you need cash to cover three to six months’ worth of essential spending in an easy access savings account or cash ISA, and when you have retired you should be able to cover one to three years’ worth.”
For some households, even one month’s expenses is a good starting milestone. The key is consistency – saving small amounts regularly adds up surprisingly quickly. If the idea of building thousands feels overwhelming, focus on your first £250, then £500, then £1,000.
Your emergency fund should ideally be kept in an easy access savings account. At the time of writing, Sidekick paid 4.48%, Cahoot 4.4% and Chip 4.37% AER.
Make use of a Stocks and Shares ISA
Once you’ve got your debts under control and built an emergency cushion, you’re in a stronger position to begin planning for the long-term. Investing means putting your money into assets with the potential to grow – shares, bonds, funds or a mix of these.
A stocks and shares ISA remains one of the most tax-efficient ways to invest. You can invest up to the annual £20,000 ISA allowance each tax year, and any growth or dividends inside the account are tax-free.
“If you’re putting money away for five to 10 years or more you should at least consider investing some of it in a stocks and shares ISA, because although investments will rise and fall in the short term, over the longer term they tend to produce more growth than cash,” says Coles.
You don’t need thousands to begin investing. Many platforms allow regular contributions from £25 a month. Creating a direct debit for monthly investing mirrors the habit you’ve built with your emergency fund – steady contributions over time are often more effective than irregular lump sums.
