Your Guide to Mastering Your Money in 2025
The beginning of a new year is the perfect time to take control of your finances to set yourself up for a strong financial year ahead. In this post, we’ll dive into a step-by-step action plan to make approaching your finances easier and a little less daunting.
Step One: Reflect on 2024
Before you set new goals, take some time to look back at the prior year. Grab a journal, build a comfortable setting, and begin with reflecting on the following questions:
What were my most significant financial accomplishments this year?
Did I reach my savings goals?
What financial obstacles did I encounter in the past year?
Which areas accounted for the majority of my spending?
What is the status of my emergency fund?
What are my key financial strengths?
What are my financial weaknesses?
What lessons about money management did I learn in 2024?
Introspection is the base to a successful year ahead.
Step Two: Set Financial Goals for 2025
Now that you’ve looked back at 2024, think about what you hope to do more of and less of in 2025. Whether you’re saving for specific life events, a down-payment for a new home, or increasing your investments, ensure your goals are clear, realistic, and aligned with what matters the most to you.
Consider completing this exercise to ensure your goals are aligned with your values.
List Your Core Values: Write down 3-5 values that guide your life (e.g., security, freedom, family, growth, adventure).
Connect Values to Goals: For each value, write down one financial goal that supports it. For example:
Security: Build an emergency fund with 6 months’ worth of living expenses.
Growth: Invest 10% of your income in a diversified portfolio.
Family: Save for a family vacation or education fund.
Prioritize Your Goals: Rank your goals in order of importance. Focus on the top 2-3 goals to avoid feeling overwhelmed.
Define Actionable Steps: Break each goal into smaller steps. For example:
Goal: Build an emergency fund.
Step 1: Calculate 6 months’ worth of expenses.
Step 2: Open a high-yield savings account.
Step 3: Set up an automatic monthly transfer.
TBP Tip: Break your goals into short-term (3-6 months), medium-term (1-3 years), and long-term (5+ years) to make them more achievable. Write them in a separate page in your journal or document, and continue to revisit these goals every quarter.
Step Three: Review Your Savings Plan
Next, we’re tackling your savings plan. The easiest way to start this is by looking into if you are optimizing your savings.
For now, consider saving 1% more every month for as long as you can. Over time, this small adjustment can make a big difference. If you can contribute more some months, even better!
As a next logical step you should ask yourself, am I getting the best available return on my savings account? If you were saving, do you think your savings could earn interest that pays you more? Don’t be afraid to talk to your bank about higher interest rates or different types of savings accounts.
Finally, look into these avenues to cut down on your spending to accelerate saving.
Evaluate your spending on everything from food to entertainment and identify areas to cut back.
Review and cancel any subscription services you no longer use.
Contact your insurance providers to explore potential savings on medical, car, or home insurance plans.
Set up an automatic transfer to your savings account with each paycheck.
For one-time use items, borrow from friends or rent instead of purchasing.
Use a 24-hour rule to decide on non-essential purchases to avoid impulse buys.
Step Four: Assess Your Investments
How successful were your investments in 2024? Compare your investment returns to see if they met your expectations and analyze the reasons for performance success or failings. This is a great time to tweak your portfolio to see if they are still consistent with your goals. In case your preferences or ability to take on risk has changed, consider making changes to your investments as well.
Here’s a guide you can ask yourself to make assessing your investments more approachable:
Are your current investments in line with your financial goals, both short-term, medium-term and long-term?
Do you have a diverse portfolio that minimizes risks while maximizing potential returns?
Are you incurring any unwarranted costs?
Are you overlooking better investment options?
Can I use tools like The Big Portfolio’s card decks to further educate myself financially?
A financial planner can also be helpful if you feel unsure about bettering your investment strategy. They may assist you with filling your gaps regarding understanding professional practices or finding possible growth areas.
Always remember that this is money that you have worked so hard for, and being vigilant helps to ensure that it is as useful as possible for you. This means that understanding and implementing a plan to manage your investments will be the first step in making sure that your financial future is secure.
Step Five: List your Asset and Liability Inventory
Balancing your list of assets and liabilities, such as your debts, will not only help in assessing your financial position but also help ensure that your estate plans are current.
Here are a few sub-steps to assist you in your financial inventory tracking:
List your Assets: This includes any bank accounts you hold, investment accounts, real estate, cars, retirement accounts and pretty much anything you own that holds value. Assets like stocks and bonds or even intellectual property should also be taken into account.
List your Liabilities: Record your debts such as mortgages, credit card debt, student loans, and any personal loans.
Examine Beneficiaries: Make sure the beneficiaries listed under your accounts and on insurance policies are your desired ones.
Talk to Your Executor: Get in contact with the person who has been named as the executor of your estate and make sure that they are aware of your estate planning needs and/or wishes.
Modify Power of Attorney Documents: Lastly, ensure that any power of attorney documents are modified to meet your present needs.
All in all, make sure all i’s are dotted and t’s crossed. This means always having secure access to important documents such as financial inventory and estate records, through digital storage methods or a safe. Your loved ones will thank you.
Final Thoughts
Mastering your money in 2025 is about aligning your finances with your values and dreams. By reflecting on the past, setting meaningful goals, making the most of your savings, and safeguarding your financial future, you can make this year your most successful yet.
So, grab that journal, cozy up, and start planning. Take the extra financial step and use The Big Portfolio’s decks to make 2025 financially empowering!