Key Points to Keep in Mind
Reviewing your finances at the start of the year can help you create a solid plan and achieve your long-term financial goals.
Helpful steps include assessing your budget, checking your emergency savings, and managing debt.
It’s also important to see if you’re staying on track with goals like retirement savings.
The new year is a great time to update your estate plan and insurance policies.
Going over your financial situation at the beginning of the year may not seem as exciting as resolutions like exercising more, eating healthier, or reducing stress, but financial stability is closely tied to overall well-being.
The good news is that improving your financial health may be easier than you think. Here are six straightforward steps to set yourself up for success in 2025 and beyond.
1. Review Your Budget
Start the year by taking a fresh look at your budget. Examine your average monthly income, fixed expenses, and variable costs, and set financial priorities for 2025 to create a budget that works for you. This is especially important now, as inflation continues to impact the cost of everyday items like groceries and gas.
Need help getting started? Morgan Stanley’s financial tools, available on Morgan Stanley Online, can help you track income and expenses and create a budget tailored to your needs.
2. Evaluate Your Emergency Fund
It’s always a good idea to check whether you have enough savings for unexpected expenses—especially during times of economic uncertainty.
An emergency fund can help keep you financially secure if you face sudden life changes, such as job loss or an unexpected expense.
A common recommendation is to have three to six months’ worth of living expenses in a safe, easily accessible account. However, as your life situation evolves, your emergency savings should be adjusted to match your current needs.
3. Manage and Reduce Debt
Even if you already handle your debt well, you might want to take additional steps to reduce or consolidate it. If you’re expecting a raise or year-end bonus, consider putting some of that extra money toward paying down high-interest debt.
Also, think about consolidating multiple debts into one with a potentially lower interest rate. This can simplify your financial obligations and reduce stress. Your Financial Advisor can help you explore options for managing your debt more effectively.
4. Check Your Progress on Financial Goals
Make sure you’re on track with your financial goals, such as saving for retirement or other major milestones. If market changes or other factors have set you back, work with your Financial Advisor to adjust your plan and get back on course.
If you’re still on track, consider setting new goals. For example, did you increase contributions to your workplace retirement plan or IRA in 2024? If so, can you contribute even more in 2025? Your Morgan Stanley Financial Advisor can help you evaluate your progress and set financial goals for the year ahead.
5. Reassess Your Investment Strategy
Take time to review your investment portfolio and make sure your asset allocation aligns with your financial goals and life stage.
For example, if you’re nearing retirement, you may want to shift some investments to more conservative options, such as fixed income. If market fluctuations have changed your portfolio’s balance, it may be time to rebalance.
Keep in mind that as you get closer to retirement, you have less time to recover from market volatility. Adjusting your investment strategy can help protect your financial future.
6. Update Your Estate Plan and Insurance Policies
The new year is a good time to review and update important financial documents, including:
- Estate Plan: If you don’t have an estate plan that includes a will, power of attorney, and healthcare directive, make this a priority. An estate plan ensures your assets are distributed according to your wishes.
- Life Insurance Policies: Check your life insurance coverage to make sure it still meets your financial needs. If your employer doesn’t offer life insurance, consider purchasing an individual policy. Major life changes—such as marriage, divorce, having children, buying a home, or starting a business—can impact your insurance needs. Reviewing your policy annually ensures that it aligns with your current financial situation and provides the right level of protection for your loved ones.
By February 1st, many people have already given up on their New Year’s resolutions. However, financial goals only work if you stick to them. Stay committed in 2025 by working with your Morgan Stanley Financial Advisor to plan for the year ahead and beyond.