By Travis Dufner
The last few years have brought significant stress for many people. With worries about a potential recession and ongoing inflation, it’s natural to question whether 2025 will offer a better outlook.
While these concerns can feel daunting, your personal finances don’t have to mirror the recent challenges. There are numerous strategies to regain control and pave the way for a brighter financial future. Before ringing in the New Year, take these 5 steps to get your bases covered.
1. Assess Your Emergency Fund
Now is the time to ensure that you have enough money set aside in your emergency fund or create a plan to build this up over the next year. An adequate emergency fund should cover 3-6 months of necessary living expenses, including mortgage or rent, utilities, groceries, transportation, etc.
With all stock market uncertainty and recession fears, many experts have suggested maintaining a larger emergency fund closer to 6-12 months of expenses. If you’re single, or your household only has one source of income, consider saving on the higher end of this scale to make sure you’re covered in the event of a job loss or reduction in pay.
However much you save, be sure this money is held in a highly liquid account. It needs to be readily available and easily accessible, but it should also be in an account that offers a competitive interest rate so that you don’t lose out on potential growth.
2. Review Your Asset Allocation & Invest with Impact
The end of the year is also a great time to review your asset allocation strategy and incorporate ESG and impact investing if desired. Given the continued impact of market volatility and historic levels of inflation these past few years, it’s crucial that you evaluate your investments and make sure your portfolio is properly diversified. It should also be tailored to your specific risk tolerance level, helping ensure that you are earning enough returns to keep up with inflation, but you are not overexposing yourself to risk.
If you are interested in using your funds to support environmental, social, or governmental issues (ESG), you can also consider impact investing as a way to potentially earn returns while also promoting change in causes you care about.
3. Consider Charitable Donations
Charitable donations are another option that can be reviewed as the year-end approaches. The holidays are a great time to give money and assets to your favorite non-profits, churches, and organizations.
Charitable donations can be used as part of your overall tax strategy, or as part of a comprehensive estate plan. Both options provide many potential benefits including supporting causes you care about, reducing your taxable income, and reducing your taxable estate.
4. Use Up Your Employee Benefits
While every employee benefit plan has its own rules and regulations, many of them expire or reset at the end of the year. You worked hard for these perks, so be sure to use them before it’s too late!
Medical and Dental Benefits
Now’s the time to take care of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.
Flexible Spending Account
Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year since you are only allowed to carry over $640 for the plan year-ending 2024. That being said, check the restrictions on your account to see what the money can and cannot be used for, and take care of any needs you may have as allowed by your plan.
Sick and Vacation Time
Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.
5. Revisit Your Plans and Policies
Lastly, take another look at your estate plan and insurance coverage. If you took the time and energy to create an estate plan, check it periodically to ensure all the documents are up to date and no major details have changed.
Your insurance needs may also change as the year goes by, so periodically review your coverages and designated beneficiaries to bring them up to date to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased. You might also want to evaluate your need for other types of insurance, such as long-term care or disability insurance.
Collaborate With a Trusted Advisor
At Millstone Financial Group, we’re here to help you regain control of your finances after a challenging few years. Let’s work together to bring your financial goals to life in 2025! With our personalized strategies and experienced guidance, you can have the support you need every step of the way.
Contact us today and schedule a complimentary consultation by calling (732) 385-8544 or emailing [email protected].
Advisory services are offered through Millstone Financial Group Limited Liability Company, a Registered Investment Advisor in the State of New Jersey. Insurance products and services are offered through Millstone Financial Group Limited Liability Company.
All material discussed is for informational purposes only. Opinions expressed are solely those of Millstone Financial Group Limited Liability Company and staff. All topics covered are believed to be from reliable sources; however, Millstone Financial Group Limited Liability Company makes no representations as to its accuracy or completeness. Investing involves risk including the loss of principle.
This article shall in no way be construed as a solicitation to sell securities or investment advisory services to residents of any state other than New Jersey, or where otherwise permitted. All information and ideas should be discussed in detail with your individual adviser prior to implementation.
This material is intended to provide general financial education and is not written or intended as tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
