New Year, New Financial Goals: A Checklist for Success
The transition to a new year provides an ideal opportunity to evaluate your current financial standing. As the year draws to a close, it’s essential to reflect on your financial habits and set the stage for success in the upcoming year.
Utilize Your Flexible Spending Account
Time is of the essence if you have a Flexible Spending Account (FSA) as the year-end approaches. It’s crucial to familiarize yourself with your employer’s policies concerning the unused balance on December 31st to avoid losing your hard-earned money.
If your calendar is sparse in medical appointments, don’t worry—you can still utilize your FSA for a variety of eligible healthcare expenses. Consider investing your remaining balance in prescription eyewear or replenishing your stock of contact lenses. Over-the-counter items like first-aid essentials, common cold medications, and sunscreen are also eligible for FSA spending. For a comprehensive list, explore the FSA Store.
It’s worth noting that the cap on employee FSA contributions will increase from $3,200 to $3,300 in 2025.
Maximize Retirement Contributions
Setting a goal to maximize your retirement contributions is a wise strategy. For the year 2025, individuals participating in 401(k) plans can contribute up to $23,500. Additionally, both traditional and Roth IRA contributions can reach a maximum of $7,000. If you’re aged 50 or older, this limit increases with an additional $1,000 allowance, totaling $8,000 for the year.
Moreover, those aged 60 to 63 will be eligible to make higher catch-up contributions to their 401(k) plans, with new limits set at $10,000 annually or 150% of the standard catch-up contribution limit, whichever is larger.
A key aspect of a solid retirement approach is consistent contributions and allowing your investments to mature without interruptions.
Evaluate Your Tax Withholdings
Although Tax Day may seem distant, now is a strategic time to evaluate your tax withholdings. Significant life events in 2024, such as marriage, divorce, or the birth of a child, may warrant adjustments to your withholdings. Utilize the IRS Tax Withholding Estimator for accurate guidance on how much income tax should be withheld moving forward.
Refresh Your Beneficiary Information
Major life changes necessitate updating your financial beneficiaries. Compile a list of everyone designated as a beneficiary on your bank accounts, retirement savings, life insurance policies, and annuities. The end of the year is an excellent time to review and adjust these details based on any new or departed relationships.
Reassess Your Financial Plan
A budget is a dynamic instrument that requires regular updates. If you veered off course from your financial resolutions earlier this year, it’s never too late to recalibrate your priorities.
Start by applying the 50/15/5 rule: allocate 50% of your post-tax income to essential expenses (like housing and groceries), dedicate at least 15% of your pre-tax income to retirement savings, and set aside 5% for emergency savings. The remaining 30% can be reserved for discretionary spending such as dining and travel. Consider utilizing this budget calculator to assess your saving and spending effectively.
Establish Fresh Financial Goals
Regardless of your current financial circumstances, being candid with yourself about your fiscal health is crucial. Take the time to map out areas for improvement in your finances. One effective approach could be a values-based budget.
Ask yourself if you have a strategy to eliminate any debt, whether your spending habits require adjustment, or if you should be reallocating funds between saving and investing.
To enhance the probability of meeting your financial aspirations, it’s essential to be specific. Identify what you want to achieve, when you’d like to reach those goals, and how much you intend to save. For instance, if planning for a vacation, determine a set monthly savings goal to make your dream a reality. Implement strategies such as budgeting, leveraging high-yield savings accounts, or establishing automated savings plans.
As the new year approaches, reassess your priorities. Investing in a financial advisor can also be beneficial, as their expertise may provide valuable insights to help you articulate and achieve your short- and long-term financial objectives.
