Heading into 2025, it’s time to take stock of your budget, debt and investments—and check them against your financial goals. These six steps can get you started.
Revisiting your finances at the start of a new year may not seem as exciting as making other resolutions, such as exercising more, eating healthier or taking steps to reduce stress in your life, but your financial wellness is often closely connected to your physical and mental health.1
The good news: Improving your financial wellbeing might be easier than you think. Here are six simple steps you can take to help set yourself up for financial success in 2025 and beyond.
Start the year by revisiting your budget. Assess your average monthly income, as well as your fixed and variable expenses, and determine your financial priorities for 2025 to develop your ideal budget. Reassessing your spending plan is critical now, as still-high inflation means you’re likely spending more on everyday items like groceries or gas.
Having trouble getting started? Morgan Stanley’s financial management tools, available on Morgan Stanley Online, can help you track income and expenses and create custom budgets to optimize how you put your money to work.
It’s always a good idea to double-check that you have adequate funds set aside for a rainy day—that’s especially true in times when the economy may be slowing from its once-robust pace. Economic growth has slowed this year, with GDP expanding at just 2.8% in the third quarter, down from 3% in the second and 4.4% in the third quarter of 2023.2
Particularly in an uncertain economy, an emergency fund can help keep you financially afloat in unforeseen life circumstances, such as a change in your or a loved one’s employment situation.
A general rule of thumb for an emergency fund is saving three to six months’ worth of living expenses in a safe, liquid account. But your lifestyle can change over time, so if you have an emergency fund make sure it’s still adequate for your current needs.
Even if you’re good about managing your debt, consider taking steps to help reduce and consolidate it further. For example, if you’re expecting a raise or year-end bonus, applying the extra income to any balances with high interest rates could help reduce your balance more quickly.
Then, think about consolidating any remaining debt, which may help you swap varying interest rates on multiple loans, credit lines or cards for a potentially lower rate on a single loan. Reducing the number of loans you carry can also help simplify your financial life and ease money stress. You may want to ask your Financial Advisor about possible strategies.
Check whether you’re still tracking toward your goals, such as saving and investing for a comfortable retirement. If recent changes in the market or other factors have temporarily thrown you off course, work with your Financial Advisor to figure out how you can get back on the right path.
Or, if you’re still on track with your goals, talk with your Financial Advisor about new goals you want to work toward. For example, in 2023, were you able to boost your contributions to a workplace retirement plan or individual retirement account? In 2024, can you contribute even more to these or other accounts? Your Morgan Stanley Financial Advisor can help you look holistically at the year ahead and assess your progress towards your goals.
Think about revisiting your asset allocation, or how your investments are split within your portfolio amongst equities, fixed income and cash. Asset allocation in your portfolio should ideally reflect your various life stages and the saving goals associated with them.
For example, as you near retirement, you may consider moving portions of your portfolio into a more conservative asset allocation like fixed income. Or, if recent market volatility has caused your portfolio investments to stray away from your target allocation it may be time to rebalance.
Remember, as you near retirement age, you have less of an ability to absorb volatility from the stock market.
The New Year can also be a good time to review and consider:
By February 1st, many of us have lost track of our resolutions, but resolutions only work if you stick to them. To do that in 2025, connect with your Morgan Stanley Financial Advisor to discuss your financial goals for the year ahead and beyond.
Footnotes:
1 Soomin Ryu, Lu Fan, “The Relationship Between Financial Worries and Psychological Distress Among U.S. Adults,” Feb. 1, 2022.
2 https://www.bea.gov/news/2024/gross-domestic-product-third-quarter-2024-advance-estimate
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This article has been prepared without consideration of an individual’s investment objectives, risk tolerance or financial circumstances. The products and services highlighted are ideas only. Before a Financial Advisor makes a recommendation of any of these suggested ideas, the Financial Advisor must (i) have a reasonable basis for such a recommendation, (ii) take into account the client’s essential facts to ensure it is appropriate for the client and (iii) urge clients to consult their personal tax and/or legal advisor to learn about any potential tax implications that may result from acting on a particular recommendation. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning, charitable giving, philanthropic planning and other legal matters.
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