The new year presents fresh opportunities to reflect on your financial health and strategize for the months and years ahead. Whether you are experiencing life changes, setting ambitious goals, or fine-tuning your existing plan, this is the perfect time to assess your financial picture. Here are key areas to focus on to kick off 2025:
Review Your Progress Toward Your 2024 Goals
Start by assessing the progress you made towards your goals last year. Take a snapshot of where you stand today versus the beginning of 2024. Celebrate achievements and evaluate areas where strategies may have fallen short. Ask yourself: What worked well, and why? Which areas need adjustments or new approaches?
As you set goals for 2025, categorize them into short, intermediate, and long-term priorities. Consider any anticipated life events that could impact your plan, such as a move, marriage, birth, higher education, retirement, illness, or job/career change. If you or a member of your family will be reaching a milestone age this year, make a note to review relevant financial considerations. For a list of relevant milestones, check out our guide. If you have questions about steps you should take as you approach a milestone, reach out to your financial advisor, tax preparer, or attorney to talk it through.
Update Your Income, Savings, and Expenses Plan
A lot can change in a year, from income fluctuations to unexpected expenses. Reassess your household cash flow:
Are your income and expenses projected to remain the same in 2025?
Is your spending plan aligned with your current priorities?
If you answered no to either of these questions, it is a good idea to review your income and expenses and adjust your spending plan accordingly.
If you are saving toward a specific goal, review your savings rates to ensure you are on track. If you have goals that are fully funded, be sure to redirect surplus savings to other priorities.
Do you need to review your company benefits to ensure you are making the most of what your employer has to offer? If so, consider how you can maximize your annual contributions to any retirement accounts, Health Savings Accounts, Flexible Spending Accounts, and Dependent Care Flexible Spending Accounts. Also, if eligible, consider funding a traditional or Roth IRA for 2024 before the April 15, 2025 deadline. If your spouse does not have earned income, explore spousal IRA contributions. Since eligibility to contribute to an IRA depends on your earned income and whether you are an active participant in an employer-sponsored plan, it can get quite complicated whether this applies to you. We recommend talking to a financial professional if you are unsure. You can schedule a complimentary, no-obligation call with us here!
If you have been taking Required Minimum Distributions (RMDs) or this is your first year doing so, carefully consider the timing of your withdrawals to align with your goals. You can take the RMD in smaller portions throughout the year or defer it until later to allow compound interest to continue growing your investments for as long as possible. Developing a thoughtful strategy for your RMDs can lead to significant benefits. Do not forget to review your withholdings with your tax preparer to ensure everything is properly accounted for.
The new year is a great time to review your insurance needs:
Is your life, disability, or long-term care insurance coverage adequate?
Have recent property improvements or acquisitions necessitated updates to your homeowners or renters' insurance?
For those with high-deductible health plans, try to maximize your Health Savings Account (HSA) contributions.
Finally, if you plan to give to charity or provide financial gifts to loved ones, start the year by discussing the most tax-efficient strategies with your financial advisor or tax preparer. This can help you maximize deductions for charitable donations and ensure you make the most of your annual exclusion for noncharitable gifts to family or friends.
Optimize Investment Portfolios
2024 was a very good year for the stock market. As a result, take a close look at your portfolio's performance and risk allocation. During times like last year, it can be easy for your investments to get over-extended and be over-allocated to an investment or asset class, thus putting your investments in a position to take on an undue amount of risk. Check to see:
Have market changes impacted your asset allocation, and do you need to review your allocation across the accounts in your portfolio?
Do you need to review your investment risk tolerance?
Do you need to review the performance of your investment accounts?
Do you need to rebalance to stay aligned with your goals and risk tolerance?
Also, if you executed tax-loss harvesting trades in 2024, revisit those holdings to determine if rebalancing is needed. Be mindful of the tax consequences of any adjustments.
Evaluate Your Estate Plan
As a rule of thumb, it is a good idea to update your estate plan every decade or when you have a significant life event (e.g., moving states, getting married, having a child, death of a spouse, etc.) This ensures that your plan is current and keeps up with ever-changing laws. If your estate plan has not been updated recently, or you have been putting off reviewing it for a while, make 2025 the year where you take the opportunity to ensure it reflects your wishes:
Are your documents up to date, including wills, trusts, and powers of attorney?
Is asset ownership and titling consistent with your estate strategy?
If you haven't already, check out our blog post about the three essential estate planning documents everyone should have.
Review and Update Your Net Worth Statement
Tracking your net worth over time can be a powerful motivator. It provides you with a clear picture of your progress and keeps you focused on long-term goals. While your net worth may fluctuate due to market movements or life events, reviewing and updating it at least once a year helps ensure you are on track toward financial freedom. As you evaluate your financial picture for 2025, consider these key areas:
Replenish Your Emergency Fund – If you dipped into your emergency savings in 2024, now is a great time to create a plan to rebuild it. Having a solid cash cushion can provide peace of mind and financial stability in the face of unexpected expenses.
Tackle Debt with the Avalanche or Snowball Method – If paying down debt is a priority this year, consider using either the avalanche method or the snowball method. With the avalanche method, you first focus on eliminating debts with the least favorable terms while maintaining minimum payments on others. By comparison, you pay off the debt from smallest to largest balances with the snowball method. If you anticipate needing to borrow in 2025, compare loan terms carefully to ensure they align with your overall financial strategy.
Use Your Flexible Spending Account (FSA) Funds – FSAs operate on a 'use-it-or-lose-it' basis, meaning unused funds typically expire at the end of the year. However, some plans allow rollovers or grace periods of up to two and a half months. Check your plan's rules and spend any remaining funds before they expire.
Check Your Credit Report and Score – You are entitled to a free credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) once per year through AnnualCreditReport.com. Reviewing your credit helps ensure accuracy and catch any potential errors or fraudulent activity early. If you spot an issue, you can dispute it with the credit agency to correct your report.
By proactively reviewing these financial areas at the start of the year, you will be better positioned to make informed decisions and stay on track toward your financial goals in 2025.
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions.