Welcome to 2025 — a fresh year with fresh possibilities! If you are joining millions of others in setting New Year’s resolutions, do not forget about your finances. There is no better time than now to embark on a journey toward a more secure financial future. The following financial planning resolutions can help you start the year off right.
#1 – Update your financial plan.
As your life and goals change over time, it is important that your financial plan keep up. The new year serves as a great reminder to review and update your financial plan. Consider how your personal situation, goals and finances have changed over the past year, and update your plan accordingly. Your financial advisor can help you identify any necessary updates that should be made to your financial strategies and investments to keep up with your ever-changing life.
#2 – Review your investment portfolio.
If it has been a while since you reviewed your investment portfolio, now is a good time to check in on it. Over time, your investment allocation can begin to drift away from your target as some sectors outperform others. If you fail to regularly rebalance your portfolio, this drift could increase your investment risk over time if one asset type begins to dominate your portfolio.
Take time to review your investment portfolio with your financial advisor to help ensure it continues to meet your needs. He or she can help you rebalance to your target allocation.
#3 – Increase your 401k contributions.
Making small, annual increases to your 401k contribution percentage can have a big impact on your long-term retirement savings, and it is unlikely you will feel the impact in your take-home pay. Consider increasing your contributions by 1% to 2% in the new year. Or, if your plan allows, sign up for automatic contribution increases so that you do not have to worry about making the change each year.
#4 – Make a plan to pay off debt.
If you are carrying debt into the new year, make a plan to pay it off. Credit card debt can be especially harmful to your long-term financial security, as high interest rates and fees eat into your savings potential.
Consider one of two payoff strategies:
- The snowball method, which involves paying off the debt with the smallest balance, then moving on to the debt with the next smallest balance, etc.
- The avalanche method, which involves paying off the debt with the highest interest rate first, then moving on to the debt with the next highest interest rate, etc.
#5 – Check in on your emergency savings.
Did you tap into your emergency savings in 2024? If so, it is important to build it back up. Be sure to save at least three to six months’ worth of living expenses in a liquid savings account. These assets can be used to cover unexpected expenses without requiring you to sell out of your investments at inopportune times.
#6 – Plan for big purchases.
Do you anticipate any large expenses in 2025? Maybe it is time to purchase a new car or you wish to save for a down payment on a home. Whatever big purchases are in your future, be sure to plan for them early. Make a plan to set aside a certain amount of money each month. Consider saving that money in a separate savings account or money market fund so that you are not tempted to spend it in the meantime.
#7 – Review your credit reports.
The new year is a great time to check in on your credit score. Each of the major credit agencies provides one free credit report per year. You can request them at the following websites:
- Equifax (www.equifax.com)
- Experian (www.experian.com)
- TransUnion (www.transunion.com)
Could you use some help implementing your 2025 financial resolutions? We would love to have a conversation. To learn more about how United Capital Financial Advisors can help you start the year off right, please contact us.
