As the new year begins, it’s the perfect time to reset, refocus, and recommit to your financial health. We make resolutions to improve our physical and mental well-being. Why not do the same for our finances? Whether you’re planning for retirement, building a safety net, or simply aiming to feel more in control of your money, having a solid plan is key.
Step 1: Build Confidence with Budgeting
First things first – nobody likes a budget. Let’s reframe that so that moving forward we have a Spending Plan instead. Why? A spending plan isn’t about restrictions—it’s about empowerment. By understanding exactly where your money is going you can make informed decisions that align with your goals. Here are a few simple but effective steps to get started:
- Know What You Owe: We’ve all heard of Good Debt and Bad Debt, but not everyone agrees on which is which. Rather than calling it Good or Bad, start by knowing how much. This list should include the balance of every loan (auto, home, student, etc.) and credit card – even money borrowed from a friend. Don’t forget to note the interest rate of each as well!
- Know What You Spend: Review your expenses, everything from minimum monthly payments on the items above to your monthly bills. Don’t forget to list your discretionary spending, too. Relying on general perceptions can lead to oversights—track the actual dollars to gain clarity. That will allow you to know how much more you can do with your new Spending Plan.
- Automate Savings: Your bills are on autopilot. Shouldn’t your savings be, too? You may do it with your 401(k) already. Set up automatic transfers to a savings or investment account to effortlessly grow your financial cushion.The less effort your plan takes the easier it will be to implement.
- Cancel Unused Subscriptions: Take a moment to audit your bank and credit card statements for recurring payments you no longer use. A quick Google search of Amazon, Prime and Google Subscriptions may reveal a variety of unused services. Canceling these can free up funds for more intentional and meaningful goals. Don’t forget to review your streaming services and cable bill while you’re at it, even consider a new phone plan like Mint Mobile to cut costs there, too.
- Shop with Intention: While treating yourself is important, being mindful of spending can fast-track your ability to enjoy a financially secure future. A rule of thumb when you see something you want is to mark the date. If it’s still important two months later, consider adding it to your Spending Plan or financial goals.
If this feels overwhelming you’re doing it right! You may want to consider chatting with a financial advisor as well to create a plan tailored to your unique circumstances.
Step 2: Leverage COLA and Annual Raises to Your Advantage
Inflation impacts everything, including Social Security benefits. For 2025, the Cost-of-Living Adjustment (COLA) has been set at 2.5%, translating to an average increase of about $50 per month for recipients. While that might not seem like much, in 2023 it was 8.3%. Who says it has to go to waste?
COLA serves as a reminder to reassess your financial plans and budget. With hundreds of ways to file for Social Security benefits, working with a professional can help you make the most informed choices and align your benefits with your long-term goals.
If you’re still actively working and receive annual raises, why not consider putting a portion of that raise to work by increasing your monthly savings by all or a portion of the raise?
Step 3: Save Strategically for the Expected—and the Unexpected
Saving is more than just setting aside money—it’s about creating a confident future. I had a mentor ask once why we save money. He said, “So we can spend it! Just not now.” With that in mind, here are some tips to optimize your savings in 2025:
- Optimize Fixed Expenses: Review your recurring bills and explore opportunities to lower costs. This can involve refinancing loans or large credit card balances, shopping for better insurance rates or leaving your current cell phone carrier. Changing cable and internet providers to receive “new customer specials” works, too.
- Plan to Pay Down Debt: Reducing debt minimizes interest payments, freeing up funds for savings. Focus on paying down what you can, when you can. It’s generally best to pay higher interest rates first, but that can vary based on your individual situation.
- Expect the Unexpected: Life happens, and having a fund for unplanned expenses—like car repairs or home maintenance—can alleviate stress and prevent financial derailment. View your bank savings account as an Emergency Fund that holds 3-6 months worth of expenses.
- Enrich your Life: Paying down debt, having an emergency fund and reducing your fixed expenses are all great, but achieving your Short Term Financial Goals makes it all worthwhile. Going to see your favorite artist live, traveling the world with the money you set aside in your Travel Fund, buying the car you saved for…those are your reasons to put a plan together and to stick to it.
A financial professional can guide you through these strategies, helping you create a plan that supports both your immediate needs and future aspirations.
Step 4: Stay Informed About Policy Changes
The political landscape can bring shifts in tax laws, Social Security, and retirement policies. For example, the incoming 2025 administration has proposed extending the Tax Cuts and Jobs Act and eliminating taxes on Social Security, but there’s also speculation about potential cuts to Medicare and Social Security. In addition, on January 5th, 2025, the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) were eliminated. Those federal rules reduced Social Security payments for workers eligible for public pensions based on work not covered by Social Security, including CalSTRS members.
With so many uncertainties, staying informed is essential. Regularly reviewing your financial plan with a professional can help you anticipate and adapt to changes, ensuring your strategy remains aligned with your goals.
Start the Year Strong
2025 is full of possibilities, and the steps you take now can set the tone for a prosperous future. From creating a budget to optimizing your savings and staying on top of policy changes, every small effort contributes to a more secure and confident financial outlook.
If you’re ready to take the next step, reach out to our team of experienced professionals. Together, we can build a personalized plan to help you achieve your financial goals and enjoy the life you’ve envisioned.
