Reflecting on your past is helpful; you can’t change it, but you can learn from it and use that knowledge to improve your financial situation. Let’s begin 2025 by focusing on the positive. You made wise decisions with your inheritance and put that money to good use. Now, three years later, you’ve built up a solid amount of equity in your home. Well done!
Before giving you steps to work on this year, I want to share one final piece of advice: We aren’t born with the skills, knowledge, and confidence to make strong financial decisions. These are things we learn and practice over time until they become second nature. Understand that along the way, you may stumble and make mistakes. This is part of the learning process. When this happens, don’t give up or get frustrated. Learn from it, and if needed, seek professional help to get back on track.
Although I don’t know your full financial situation, I can still share my top tips to help improve your finances moving forward.
1. Get Your Budget in Shape
To get your budget in good condition, start by tracking your expenses to see where your money is going. This will help you figure out whether you’re living within your means or overspending. Don’t forget to include monthly costs for seasonal or annual expenses and the minimum payments on any outstanding debts.
Once you have this information, you’ll need to decide where you can cut back to free up money for your financial goals. It’s a good idea to have two separate bank accounts: one for monthly expenses and another for savings, such as for annual or seasonal costs, emergencies, or financial goals.
2. Be Value-Conscious
What we spend money on can either help or hurt our financial progress. Your challenge for 2025 is to review all of your expenses and figure out if you’re getting good value for the money spent. Often, it comes down to needs versus wants. For example, this might be the year to reconsider your subscriptions. If you’re paying a lot for cloud photo storage or several streaming services, consider downsizing. You could save $500 or more annually. I suggest involving your teenagers in this challenge, as they will feel the impact of the changes too. As a family, create rewards for the savings you achieve.
3. Start Working Towards a Financial Plan
This is where many people get stuck. You don’t need to spend months gathering information and creating a complex plan. Your financial goals will evolve and become clearer over time. The key is to start. For example, set a goal this year to open a savings account and set up automatic monthly deposits for car maintenance, insurance, or savings for the holidays. Remember, success leads to more success. It’s easier to tackle bigger goals once you have a few smaller wins behind you.
4. Pay Yourself First
It sounds simple, but this is a key reason why many people fail to meet their financial goals. They pay bills and cover expenses first, and then wonder why there’s not much left to save. A great way to handle this is by having your bank automatically deposit your savings for the month into a separate account as soon as you’re paid. Take this off the top of your paycheck, then live on the rest.
5. Pay Down Debt
For most people, paying off non-mortgage debt, such as credit cards, car loans, or lines of credit, in a year may not be realistic. However, it is possible to work toward living on a cash basis and set a goal to pay down a percentage of your non-mortgage debt each year. Focus on paying off high-interest debt first, while continuing to make minimum payments on other debts. Whenever you come into extra money, use some of it to pay down your debt faster.
6. Maximize Employer-Sponsored Savings and Retirement Programs
If your employer offers matching contributions to retirement savings programs, you can’t afford to skip out on those. It’s essentially free money, and your future self will appreciate it. By contributing to a registered retirement savings plan (RRSP), you’ll also reduce your taxable income, so the impact on your take-home pay will be less noticeable.
7. Review Your Progress Each Month
Continue tracking your expenses and reviewing your budget to make sure you’re living within your means. Adjust as your income and expenses change. Keep an eye on your debt reduction and how much you’re saving toward your goals. While it may feel like extra work at first, with practice, it will become a habit and something you look forward to as you see your progress each month.
The Bottom Line on Smart Financial Moves for the New Year
It’s easy to get caught up in setting big financial goals or making resolutions at the start of a new year. Instead of trying to do too much all at once, take a long-term view. Decide what you want to achieve over the next five to ten years. Use this timeline to create action steps and set benchmarks to track your progress. Like the story of the tortoise and the hare, slow and steady wins the race to financial security.