If you want to look back on 2025 with satisfaction, here are some financial moves you might make now or soon.
1. Get out of debt
If you’re aiming for an 8% or 10% return on your investment but are paying 15% or 25% interest, it’s hard to get ahead. Therefore, aim to get out of high-interest debt as soon as possible.
2. Living below your means
Each of us should spend less than we earn and live less than we earn. The greater the difference between your income and expenses, the more money you have for things like retirement savings and your child’s college education. What’s important to you.
3. Have an emergency fund ready.
Unless you are financially independent, you should have an emergency fund that can cover at least three months of non-negotiable expenses (taxes, housing, food, transportation, utilities, etc.). ). You might not expect to be fired from your job or face a sudden large expense, such as a major car repair or major surgery, but it can happen. Having an emergency fund available to you in times like these means you don’t have to dig into your savings or retirement accounts or take on debt.
4. Rebalance your portfolio
At The Motley Fool, we extol the virtues of investing in great companies (or great, powerful index funds) and then letting those investments grow over the long term. Legendary investor Warren Buffett has said that his favorite holding period is forever.
Still, it may be wise to rebalance your portfolio. For example, let’s say you’re nearing or already retired and want to split your portfolio 60/40 between stocks and bonds. Stocks tend to grow faster than bonds, so after a few years your portfolio could be 80% stocks and 20% bonds. In that case, you can rebalance by selling some stocks and buying more bonds to get back to or closer to your desired asset allocation.
5. Make good use of your retirement accounts
To prepare for a promising 2025 and the years beyond, take advantage of tax-advantaged retirement accounts like IRAs and 401(k)s. There are two main varieties of each: Traditional and Roth.
Traditional accounts receive pre-tax contributions, reducing your taxable income by the amount you contribute. Roth accounts accept after-tax money, and if you play by the rules, all withdrawals in retirement are tax-free. Imagine building an account worth, say, $400,000 and being able to access it tax-free by the time you retire. That’s a big deal.
The IRA contribution limit for 2025 is $7,000, or $8,000 if you’re 50 or older. If you have multiple IRA accounts, the limit applies to all IRA accounts. So you can contribute $4,000 to one account and $3,000 to another, but not $7,000 to each. The 401(k) contribution limit is $23,500 in 2025, with an additional $7,500 allowed if you’re 50 or older.
6. Set up an HSA if possible – or set up an FSA
Not everyone can get a Health Savings Account (HSA). You must enroll in a high-deductible health insurance plan. However, if you can open and use your HSA, it’s well worth it. You contribute money to your HSA on a pre-tax basis, and the moola can be used to pay for eligible medical-related expenses such as medications, doctor visits, orthodontics, lab work, surgeries, and more. Even better, any money you don’t spend from your account stays in your account and grows, making it available to you in retirement. (And when you withdraw money for qualified medical expenses, it’s tax-free.)
If you don’t have access to an HSA, find out if your employer offers a Flexible Spending Account (FSA) where you can put money aside for medical expenses or dependent care. Keep in mind that your FSA money can be spent or lost each year.
7. Update beneficiaries
Another smart thing to do is to update the beneficiary on your various accounts if updates are warranted. For example, if you are currently divorced, you may not want your ex-spouse to inherit certain accounts. If you have a falling out with your sibling or have a new beloved stepchild, you may want to adjust your beneficiaries accordingly.
8. Organize your estate planning documents
If you haven’t done so already, create important estate planning documents, such as a will, durable power of attorney, health care power of attorney, living will or advance directive, and guardian designation if you are the parent of a child. I’ll have it done. Minor. If you have prepared these documents but a few years have passed or your life circumstances have changed, consider updating some or all of them. Many people may want to consider establishing a trust.
And don’t put off these tasks because you think you’re too young. Don’t be tempted by fate. Because it’s very likely that you’ll need one or more tasks in your 30s or 40s.
9. Turn your financial life into a game
Finally, since money management isn’t usually all that fun (though it’s certainly exciting to watch your money grow like in Gangbusters), we’ve decided to “gamify” some of it. Please consider doing so. for example:
Try to spend less each week at the supermarket than the previous week. This cannot go on forever, but it may last for a few months. Consider competing with your friends: See who can save the most money each month. Take the Pantry Challenge: See how long you can go without doing anything. Shopping for food and eating at restaurants. You probably have plenty of food in your fridge, freezer, and pantry to sustain you for a while. Track your credit score and start working to improve it. Perhaps compete with your loved ones and see who can improve the score the most. Set debt reduction goals and track your progress. Try increasing the automatic contributions to your 401(k) account each year so you can get by with less.
Keep in mind that if you do a little searching online, you can find several apps that can help make managing your money more fun.
If you act on some or all of these smart money moves, you’ll be able to finish 2025 in a stronger financial position. And you’ll be proud of yourself too.
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