Typically, the end of the year is a time for change, reflecting on past accomplishments, and setting new goals. Not only is personal change important but using this time to whip your finances back into shape will allow you a chance to start the year with renewed financial confidence.
This year, financial resolutions are a top priority for many. Around 54 percent of U.S. consumers are planning to make a financial resolution for 2025, according to a national survey conducted by Discover Personal Loans.
In addition to this, many plan on saving more, earning more, and spending less. Roughly 27 percent of consumers surveyed plan on building an emergency fund, while a smaller third of consumers want to pay off consolidated debt.
As plenty of people are planning to improve their finances and make a change in the coming year - knowing where to start and what to do can help you effectively navigate the financial year ahead.
Track last year’s progress
Before diving into financial planning for the year ahead, it’s important to backtrack last year’s progress to have a better understanding of which goals were achieved and which came up shorter than expected.
For instance, a goal that many have is to save more for emergencies such as medical expenses or to save for a downpayment on a property. Perhaps you managed to save quite a bit of money this year, but you came in below your goal, meaning that next year you will need to focus more of your time and energy on making financial adjustments that support this goal.
Tracking past progress can help determine which goals worked. It’s good to celebrate your financial achievements. Looking back at the things you’ve accomplished, will provide you better insight into the upcoming year, but also how you can make adjustments as your financial situation changes.
Set a realistic financial goal
Following your analysis of last year’s financial progress, the next step is to start evaluating possible goals and choose those that align with your near and long-term achievements. By having a clear idea of what you are looking to achieve in the coming year, you can begin setting up a financial plan that works for you.
Instead of being overly ambitious, try and start with something that is in line with your financial abilities. For example, your plan is to save a bit of extra money each month. Start with saving smaller amounts such as 5% or 10% of your income. After each month, you can steadily make adjustments to your spending habits and further increase your savings amounts.
Anyone who’s made new years resolutions will know that sticking with these goals can become more challenging as the year progresses. In reality, most new years resolutions fail. Only 9 percent of U.S. adults who make resolutions complete them. Most people quit before the first week, and roughly 43 percent quit by the end of January.
Select the things that work best for you, and gradually make adjustments as you become more comfortable with making financial changes that work in your favor. You don’t want to find yourself in a position where you are short on your income each month, because you are being over-ambitious about your savings or other financial goals.
Create a personalized financial plan and budget
A survey conducted by Bankrate found that nearly half of U.S. adults, or 44 percent believe that their finances will improve in the coming year, this is up compared to 37 percent from 2023.
Making financial improvements, and setting new financial goals are based on personal needs and experiences. Although there is a plethora of financial advice available online, much of this should be used as a guideline, or rather framework for setting up a financial plan that is personalized to your needs.
Creating a personalized financial plan takes into consideration your income, expenses, debt, and financial goals. Instead of using a method that may work for someone who is in a more secure financial position, start with a simpler, less complicated financial approach that is tailored to your current money needs, but helps you plan more effectively for the future.
Keep in mind that a personalized financial plan should have your financial goals factored into the equation. Your financial plan should align with whatever your goals may be and allow you enough legroom to make adjustments throughout the year.
Review bank statements and bills
Before starting the new year, take the time to review all your financial obligations. This may include things such as debt, credit, and bills for recurring expenses. Reviewing your bank statements will help you uncover where your money is going, and for which things you may be paying that you no longer use or need.
Throughout the year you may have signed up for a new subscription service, or perhaps forgotten to cancel a free trial, and have since been paying for these services on a recurring basis.
Checking your bank statements will help you clean house, make it possible to cancel recurring debit orders for things you don’t use, and remove unnecessary bills that have been leaving you feeling short of your financial goals each month.
In addition to this, reviewing your important payments will help make price comparisons easier. This is especially important for those instances where you are planning to cut back on certain expenses or have been shopping around for a more affordable option.
Consolidate your debt
Paying off debt can be a challenge for many people. Next year, there are plenty of consumers planning on reducing their debt burden, and instead putting that additional money towards their investment portfolio or even emergency savings.
Now that you are taking stock of all your financial obligations, it’s time to start thinking about a financial plan that will allow you more flexibility in repaying your debt. For starters, draw up a plan that will minimize short-term debt, which includes things such as personal loans or credit cards.
Short-term debt tends to be more costly due to having higher interest rates. By paying off these debts first, you will reduce the amount of interest you have to pay, and allow you more breathing room to focus on repaying other forms of debt or saving more effectively.
Reviewing your debts will help you with putting together a better long-term financial timeline. This allows you to plan better for upcoming financial events and makes it possible for you to factor these costs into your monthly budget.
Shop for a better savings rate
One thing you can do to improve your financial outlook for the year ahead is to consider your current savings account provides you with the best savings rate. Part of having your finances in the best shape is to ensure that you make smart decisions that will help bring you closer to your financial goals and reward you along the way.
Whether you already have some savings put aside, or planning on starting a savings fund, it’s best to shop around and see which bank or account will offer you the best interest rate. Taking advantage of a high-yield savings account will provide you with better long-term financial benefits, and help your money grow more effectively.
Check your credit report
Planning to take on more debt in the near future? Checking your credit report, before applying for a loan or taking on new debt will help you gauge how your credit score may change, or how interest rates may change based on your credit.
Reviewing your current financial standing, and credit references will give you insight into how you may have improved your credit rating over the past year. More than this, it’s a way to seek guidance on the things you can do to make improvements, such as getting a credit card or minimizing hard searches on your credit report.
Make adjustments throughout the year
Making financial provisions is an important part of planning ahead, however, things tend to change, and there may come a time when you will be forced to make adjustments to your financial plans.
You might incur an emergency that requires you to tap into your savings, or you may need to pay more taxes compared to last year. Whatever the situation, it’s important to review and adjust as the year progresses.
Depending on the situation, you may have to overcome temporary losses, which might take some time to recover from. Perhaps you strike it lucky, and receive a massive pay increase, meaning you have more disposable income to work with.
Whatever you may encounter, take caution and plan according to how things in your personal and financial life change. It’s best to realize that you are in control of your money, and should make decisions that will best benefit you in the long run.
Finishing off
Before the ball drops, it’s important to take stock of your finances and make adjustments according to your needs. Whether your goal is to save for a big-ticket purchase, such as buying a house, or perhaps looking to pay off your debt quicker, having a personalized approach will help keep your finances on track in the new year.
