Achieve your New Year financial goals: practical steps for to succeed in 2026

As 2026 approaches, Estonians across the country are setting New Year’s resolutions, with financial goals consistently ranking amongst the most popular – and the most challenging to achieve.

Whilst last year brought economic pressures including high inflation that remained a concern, the new year offers a fresh opportunity to take control of your finances, build stability and work towards long-term prosperity.

Understanding your financial landscape is the first step towards meaningful change.

According to Statistics Estonia’s latest household data, Estonian households spent an average of €5,723 per member annually in 2020, with €1,300 going towards food and non-alcoholic beverages and €933 towards housing costs.

Take a moment to figure out how your own annual spending compares to these national figures—this can help you assess if your expenses are in line with the averages or if adjustments are needed to achieve your new year financial goals.

Understanding your current financial reality in Estonia

Most people find managing their finances increasingly challenging in the current economic climate.

The economic landscape has shifted significantly over the past year. Governor of Eesti Pank Madis Müller noted that high inflation remains a concern, with forecasts predicting 5-6% inflation in 2025, approximately a third of which stems from tax rises.

The purchasing power of the average wage was not expected to increase during the year, making effective financial management more crucial than ever.

Real-life perspectives from Estonian residents reveal varied financial realities.

One Tallinn resident earning €2,100 net monthly reported spending €1,400-1,600 on living costs, yet described living “paycheck to paycheck” – a reminder that income level alone doesn’t guarantee financial security or enough money to meet all needs.

A single parent with similar earnings manages to save €500-600 monthly but reports feeling “broke most days.” As a single parent, they must decide how to allocate their resources to cover both essential and other expenses for their children and family.

Each month, they determine which financial priorities take precedence, balancing living expenses, savings, and the needs of their dependents. Someone earning €1,000 net described each month as “a new challenge” just to cover bills and other expenses.

These experiences underscore that setting financial goals must account for individual circumstances.

Setting specific, achievable financial objectives

Financial goals provide direction and motivation, transforming vague wishes into concrete plans.

The most effective goals are specific, measurable, achievable, relevant and time-bound – a framework known as SMART goals.

For Estonian residents, financial goals typically fall into three categories: short-term (0-1 year), medium-term (1-5 years) and long-term (5+ years).

• Short-term goals might include building an emergency fund equivalent to three months’ salary or paying off small consumer debts.

• Medium-term goals could involve saving for a home deposit, purchasing a car or investing in further education.

• Long-term goals typically centre on retirement planning, such as preparing to retire, and wealth building.

Recent survey data from Citadele Bank reveals Estonian priorities: 28% plan home renovations, 27% intend to travel, 16% will purchase appliances or furniture, 14% aim to buy electronics, 11% are considering a new car, and 7% would like to purchase property.

Notably, 77% intend to fund major purchases from savings rather than loans (17%) – demonstrating cultural prudence but also highlighting that without adequate savings, major purchases become impossible.

When setting your own goals, consider both your aspirations and your current reality.

If you’re earning €2,100 monthly and spending €1,600 on essentials, your remaining €500 could be allocated strategically: perhaps €300 towards an emergency fund until you’ve saved three months’ expenses, €150 towards retirement (III pillar pension fund), and €50 for entertainment to maintain quality of life whilst working towards larger goals. Sometimes, you may need to wait before making discretionary purchases to stay on track with your new year financial goals.

If you don’t meet a goal, it’s not a sign of failure, but rather an opportunity to adjust your plan and continue progressing.

Assessing your financial situation honestly

Before you can improve your finances, you need to understand them thoroughly.

Statistics Estonia is currently conducting a comprehensive household budget survey, asking 10,000 households to track every expense for two weeks. Whilst you may not be part of the official survey, you should conduct your own personal version.

Creating a budget helps you manage your finances effectively by ensuring you have funds available for expenses, savings, and emergencies, and it allows you to identify areas for improvement and gain better control over your money.

Start by calculating your monthly income after tax.

Then list every expense, categorising them as fixed (rent, loan payments, insurance) or variable (food, entertainment, clothing). According to the household budget survey methodology, Estonian households report spending 22.7% of their total expenditure on food and non-alcoholic beverages – if your food spending significantly exceeds this percentage, it may indicate an area for potential savings.

Be brutally honest about discretionary spending.

As one Estonian resident noted in discussing their €2,100 salary, “people don’t realise how easily your spending and costs go up with a higher salary if not controlled… More subscriptions, faster internet package, eating out more.”

This lifestyle inflation can occur unconsciously, making it essential to track where money actually goes rather than where you think it goes.

Look for patterns in your spending.

Do you spend more during certain times of the month? Are there subscriptions you’ve forgotten about? Could you negotiate better rates for insurance or mobile plans?

Small savings compound over time – cutting €50 monthly in unnecessary subscriptions frees up €600 annually for more important goals.

Creating a realistic budget that works

A budget isn’t about deprivation; it’s about directing your money towards what matters most. The 50/30/20 rule provides a helpful framework: allocate 50% of your income to needs (rent, food, utilities), 30% to wants (entertainment, dining out, hobbies), and 20% to savings and debt repayment.

For someone earning €2,100 net monthly, this translates to €1,050 for needs, €630 for wants, and €420 for savings. However, this rule requires adaptation for Estonian realities. With housing costs in Tallinn averaging €550 for rent plus utilities, and food costs around €300-400, essential expenses alone could easily exceed the 50% threshold, particularly for single-income households.

A more flexible approach involves tracking actual spending for one month, then identifying where adjustments can realistically occur.

One single parent managing on €2,100-2,400 monthly with a child noted they could save €500-600 by being frugal, even whilst managing a mortgage, car payments and childcare costs. Their success came from prioritising essentials and building an emergency fund before considering discretionary purchases.

Consider using digital tools to maintain your budget and discover more ways to save in Estonia. Many Estonian banks offer built-in spending analysis in their mobile apps, categorising transactions automatically. Alternatively, apps like Bilance provide Estonian-specific budgeting guidance and tools designed for the local financial landscape.

Importantly, include a category for entertainment or personal enjoyment, even if modest.

One Estonian budgeting successfully after serious debt advised: “Add that fun-money field in your budget. Even if it’s like €30-50 per month. Just do it. Denying yourself of EVERYTHING fun will only contribute to you feeling miserable.”

They found that allowing themselves small pleasures actually improved their motivation to stick to their larger debt repaymentplan, ultimately paying off two years of debt in just 18 months.

Building an emergency fund before anything else

Before investing or aggressively paying down debt, establish an emergency fund. Financial experts typically recommend saving three to six months’ worth of expenses. For the average Estonian household, this means setting aside €5,000-10,000 – a substantial sum that requires discipline but provides invaluable peace of mind.

Start small if necessary. Even €50 per month builds to €600 annually, creating a buffer against unexpected car repairs, medical expenses or temporary income loss. As your emergency fund grows, you’ll find that financial anxiety decreases proportionally – knowing you can handle life’s curveballs without resorting to high-interest credit provides genuine freedom.

Store your emergency fund in an easily accessible savings account, separate from your daily spending account to reduce temptation. Several Estonian banks offer savings accounts with reasonable interest rates, though given current inflation rates, the real value may still decrease slightly.

However, the primary purpose of an emergency fund is accessibility and security, not growth.

Leveraging Estonia’s III pillar pension system

For Estonian residents, the III pillar pension system is a type of retirement account designed to help individuals build retirement savings and offers significant tax advantages that make it an excellent savings vehicle. You can claim back income tax on contributions up to 15% of your salary, effectively giving you an immediate 20% return on investment through the tax benefit.

As one Estonian finance enthusiast advised: “If you are a salaried Estonian tax resident, use at least the III pillar, because you get your income tax returned from up to 15% of your salary.”

The tax benefit applies even if you’re an expatriate planning to leave Estonia within 4-5 years, though you’ll pay 20-22% tax upon withdrawal. The advantage lies in investing pre-tax money, allowing compound gains on a larger initial sum.

The III pillar can supplement other sources of retirement income, such as social security, and help ensure greater financial security in retirement.

Several providers offer III pillar funds in Estonia, with Tuleva and LHV index funds frequently recommended for their low fees and market-tracking approach.

Mutual funds are also available as an option, and it’s important to note that some funds may have other fees in addition to management fees. Rather than leaving your contributions in default conservative funds, actively choose an index fund that tracks global markets.

As one investor noted, “don’t forget to change your III pillar fund into something that tracks a whole market index fund, like Tuleva or LHV index.”

When developing your investment strategy for the III pillar, such a strategy should consider your overall portfolio, including equity exposure, mutual funds, and other investments, to ensure proper diversification and risk management.

For a single person earning €2,100 monthly, contributing €150-200 monthly to the III pillar provides both tax benefits and long-term growth whilst remaining affordable. The tax refund received the following year can then be reinvested or used to boost your emergency fund. If you need personalized guidance, consider seeking advisory services to help tailor your retirement savings plan to your specific needs.

Managing and eliminating debt strategically

High-interest debt significantly hampers financial progress.

Two strategies exist: the snowball method (paying smallest debts first for psychological wins) and the avalanche method (tackling highest-interest debts first to save money mathematically). Choose the method matching your personality – motivation matters more than perfect optimisation. Whilst repaying debt, avoid accumulating new balances by distinguishing needs from wants and delaying gratification.

Investing for long-term growth

Once you’ve established an emergency fund and managed high-interest debt, investments become the next step towards financial security. Investments are a key part of building long-term wealth and retirement savings.

Beyond the III pillar system, Estonian residents have several investment options.

For those interested in international markets, platforms like Lightyear allow investing in US S&P 500 index funds or world index funds. Mutual funds, especially low-cost index funds, are a popular way to diversify your portfolio and gain equity exposure. However, past performance doesn’t guarantee future results, and diversification remains important.

Also, be aware of other fees that may apply to investment accounts, such as transaction or management fees, in addition to the main service charges.

Investment strategy should align with your goals and risk tolerance.

Building retirement income is a key objective for many investors. Younger investors, and young people in particular, can benefit from starting early, as they have decades for markets to recover from downturns and to grow their retirement savings. Those approaching retirement need more conservative approaches to preserve capital. Asset allocation or rebalancing can help manage risk and optimise returns—such a strategy should be considered as part of your overall plan.

Consider working with a financial adviser or seeking advisory services if you’re unsure where to begin.

Whilst fees apply, professional guidance can prevent costly mistakes and provide personalised strategies based on your specific circumstances. If you are interested in property investing, ensure you understand the associated risks and only invest money you can afford to lose in the short to medium term.

Remember that investing involves risk, and you should only invest money you can afford to lose in the short to medium term.

Staying committed to long-term success

Financial transformation doesn’t happen overnight. It requires sustained commitment, regular assessment and willingness to adjust your approach as circumstances change. Set quarterly reviews to evaluate progress towards your goals, celebrating wins and identifying areas needing attention.

Be prepared for setbacks. Unexpected expenses arise, job situations change, and life throws curveballs. The difference between those who achieve financial goals and those who don’t often comes down to persistence rather than perfect execution. If you miss a savings target one month due to emergency car repairs, don’t abandon your plan – simply resume the following month.

Stay informed about changes affecting your finances.

Tax laws change, inflation impacts purchasing power, and new financial products emerge. Madis Müller emphasised that “orderly state finances are the cornerstone for the economy,” noting that changes to tax policy and state spending will affect everyone. Understanding these broader trends helps you make informed decisions about your personal finances.

Connect with others pursuing similar goals. Online communities of Estonian residents discuss financial strategies, share experiences and provide accountability. Learning that others face similar challenges – whether earning €1,000 or €2,100 monthly – normalises the struggle and provides practical insights.

Making 2026 your year of financial transformation

As you stand at the threshold of 2026, you have a choice: continue existing patterns or commit to change.

Start with one action this week – track expenses for seven days, open a III pillar account, or set up an automatic €50 monthly savings transfer.

Small actions build momentum. Consider using financial services, such as budgeting apps or professional advice, to support your new year financial goals and make progress easier.

Financial success looks different for everyone. For someone earning €1,000 monthly, building a €500 emergency fund represents tremendous progress. For someone earning €2,100, it might mean accumulating three months’ expenses whilst contributing to retirement. Both achievements deserve celebration. Involve your family in these milestones to share your progress and inspire collective growth.

Your journey begins with a single decision to take control.

Set specific goals, create a realistic budget, build that emergency fund, and leverage Estonia’s tax-advantaged systems. As you plan for the long term, consider your children’s future and how your financial decisions today can benefit them.

The you of December 2026 will thank today’s you for having the courage to begin. Make 2026 the year you transform your relationship with money and build the financial future you deserve.