2025 Financial Checklist: 7 Ways to Prepare for the New Year

It’s almost 2025! As we step into a brand-new year, it’s the perfect time to give your finances a fresh start. Whether you’re dreaming of a tropical vacation, planning to buy your first home, getting married, or just want to build a solid financial foundation—this checklist has got you covered! Let’s dive in and make 2025 your best financial year yet!

I. Budgeting and Expense Management

• Review Your 2024 Finances: Take a detailed look at your income and expenses from 2024. Identify areas where you can cut back or need to allocate more funds. For example, if you spent more on dining out than planned, consider cooking at home more often.
• Create a 2025 Budget: Develop a budget that reflects any changes in your income or expenses. Use tools like budgeting apps (e.g., Mint or YNAB) to track your spending.
• Set Financial Goals: Define clear goals for the new year, such as paying off $5,000 in credit card debt or saving $10,000 for a down payment on a house.
• Use the 50/30/20 Rule: Allocate your income as follows: 50% for necessities (rent, groceries), 30% for discretionary spending (entertainment, dining out), and 20% for savings and debt repayment. This simple rule can help you maintain a balanced budget.

II. Debt Management

• Assess Your Debts: List all your debts, including credit cards, student loans, and mortgages. Knowing the total amount owed and the interest rates will help you prioritize.
• Focus on High-Interest Debt: Pay off high-interest debts first to save money on interest. For instance, if you have a credit card with a 20% interest rate, prioritize paying it off before lower-interest debts.
• Consider Debt Consolidation: If you have multiple high-interest debts, look into consolidating them into a single loan with a lower interest rate. This can simplify your payments and reduce the total interest paid.
• Set a Debt Repayment Plan: Create a timeline for paying off your debts. For example, aim to pay off your credit card debt within 18 months by making extra payments each month.

III. Savings and Emergency Fund

• Review Your Emergency Fund: Ensure you have enough saved for unexpected expenses. Aim for 3-6 months' worth of living expenses in an easily accessible account.
• Automate Your Savings: Set up automatic transfers from your checking account to your savings account. For example, transfer $100 every payday to build your emergency fund effortlessly.
• Utilize Tax-Advantaged Accounts: Maximize contributions to accounts like a 401(k) or IRA. These accounts offer tax benefits that can help your savings grow faster.

IV. Investments and Retirement

• Review Your Portfolio: Ensure your investments align with your financial goals and risk tolerance. If you're nearing retirement, consider shifting to more conservative investments.
• Contribute to Retirement Accounts: Take full advantage of tax-advantaged retirement accounts. If your employer offers a 401(k) match, contribute enough to get the full match—it's essentially free money!
• Adjust Your Strategy: Regularly review your retirement goals and adjust your investment strategy as needed. For example, if you plan to retire earlier, you might need to increase your savings rate.

V. Credit and Loans

• Check Your Credit Report: Obtain a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) to ensure accuracy.
• Monitor Your Credit Score: Use services like Credit Karma to keep an eye on your credit score and identify areas for improvement.
• Apply for Lower Interest Rates: If you have good credit, consider refinancing loans or applying for a credit card with a lower interest rate to save money.
• Automate Payments: Set up automatic payments for your bills to avoid late fees and penalties. This can also help improve your credit score over time.

VI. Insurance and Protection

• Review Your Coverage: Ensure you have adequate health, life, and disability insurance. Life changes, such as marriage or having a child, may require updates to your policies.
• Consider Umbrella Insurance: For added protection, consider an umbrella insurance policy. This provides extra liability coverage beyond your standard policies.
• Update Beneficiary Designations: Review and update the beneficiaries on your life insurance and retirement accounts to reflect any changes in your personal situation.

VII. Taxes and Estate Planning

• Optimize Your Tax Strategy: Review your tax situation to ensure you're taking advantage of all available deductions and credits. Consider consulting a tax professional for personalized advice.
• Review Your Estate Plan: Ensure your will, power of attorney, and beneficiary designations are up to date. If you don't have an estate plan, now is a great time to create one.
• Plan for Long-Term Care: Consider your long-term care needs and explore options like long-term care insurance to protect your assets.

Tips for a Prosperous 2025

• Set Specific Goals: For example, aim to pay off 20% of your credit card debt within the next six months.
• Automate Savings and Investments: Automate $20 every week into a savings account. By the end of the year, you'll have saved $1,040!
• Work with a Financial Advisor: A professional can help you create a customized financial plan tailored to your needs.
• Stay Informed: Keep up with personal finance news and trends to make informed decisions.

Get Started Today!

By following this 2025 financial checklist, you'll be well on your way to achieving financial success in the new year. Remember to stay disciplined, patient, and informed to make the most of your hard-earned money. Happy New Year from MidWestOne Bank!

Feel free to reach out with any further questions or concerns!