Financial Resolutions for the New Year

Family Finances | Holiday

Are you the kind of person who makes resolutions for the new year? Here are five resolutions we encourage you to consider to boost your financial wellness in 2025.

Resolution 1: Create a budget

One of the best ways to achieve financial stability and peace of mind is by creating a budget. Whether you’ve never had one before or want to improve your current financial habits, budgeting can help you take control of your money and achieve your goals.

• Set clear financial goals: Before diving into numbers, think about what you want to achieve in the new year. Financial goals provide direction for your budget. Some common examples include: Paying off credit card debt, saving for an emergency fund, building a retirement fund, saving for a vacation or big purchase. Write down your goals and prioritize them. This will help you stay motivated and focused.
• Track your income: The first step in creating a budget is understanding your income. List all the sources of income you receive each month, including: salary, side gigs or freelance work, and passive income (rent, investments, etc.). Be sure to account for any irregular income, like bonuses or seasonal work. Calculate your total monthly income, which will serve as the foundation for your budget.
• List your expenses: It's helpful to break them down into fixed and variable categories.
• Categorize and prioritize: Once you have a clear picture of your expenses, you can start categorizing them. Essential expenses like housing, utilities, and groceries should be prioritized, while non-essential costs (such as entertainment or dining out) should be trimmed down if necessary.

Tip: If your income exceeds your expenses, you have more flexibility to allocate funds to savings, investments, or debt repayment. If your expenses are higher than your income, it’s time to adjust.

The key to a successful budget is consistency. Use budgeting tools like apps (e.g., Mint, YNAB, or PocketGuard) or a simple spreadsheet to track your spending. Compare your actual expenses to your planned budget each month and adjust as necessary.

If you find you’re overspending in certain categories, identify areas to cut back. Alternatively, if you’re saving more than expected, consider allocating those extra funds to your financial goals.

Resolution 2: Manage your Debt

Debt is neither inherently good nor bad – it all depends on how you use it. For most people, some level of debt is a necessity, especially to purchase long-term assets, such as a home. However, when unmanaged, debt becomes a burden. It’s important to stay in control.

• Keep your total debt load manageable: Don’t confuse what you can borrow with what you should borrow.
• Consider the "debt snowball" or "debt avalanche" methods:
  • Debt snowball: Pay off the smallest debt first to gain momentum.
  • Debt avalanche: Pay off the debt with the highest interest rate first to minimize overall costs.

Resolution 3: Prepare for the unexpected

Life is full of unexpected expenses, from medical bills to car repairs. Having an emergency fund gives you a safety net to cover these costs without derailing your budget. Aim to save 3-6 months’ worth of living expenses. Start small by setting aside a portion of your income each month until you reach your goal.

Resolution 4: Protect your estate

An estate plan may seem like something only for the wealthy. But there are simple steps everyone should take.

• Create or Update Your Will: A will is the foundation of any estate plan. It clearly outlines how your assets should be distributed after your death. If you already have one, make sure it’s up-to-date with your current wishes and life circumstances, such as new children, grandchildren, or significant changes in assets. If you don’t have a will, now’s the time to write one.
• Consider a Trust: While a will is important, a trust can provide additional protection for your estate. Trusts allow you to control how and when your assets are distributed. For instance, a revocable living trust helps you avoid probate (the lengthy and often costly legal process that can delay asset distribution), keeping your estate private and potentially saving your heirs time and money.
• Designate Power of Attorney: A financial and healthcare power of attorney gives someone you trust the authority to make decisions on your behalf if you become incapacitated. This ensures your financial matters and medical decisions are handled according to your wishes, even if you're unable to communicate.
• Establish a Healthcare Directive: A healthcare directive (also known as a living will) specifies the type of medical treatment you want to receive should you become seriously ill or injured. This document relieves your family members from the burden of making tough medical decisions in times of crisis.
• Review Your Beneficiaries: Beneficiary designations on life insurance policies, retirement accounts, and other financial assets often override what’s written in a will. This means it’s essential to review and update your beneficiary designations to ensure they reflect your current wishes. If you’ve had a life change (such as marriage, divorce, or the birth of a child), make sure to update these designations promptly.
• Protect Your Digital Assets: In today’s digital age, your online presence and digital assets need protection, too. This includes everything from social media accounts to cryptocurrency holdings, and online banking services. Make a list of all your digital assets and include instructions for accessing and managing them in case something happens to you.
• Ensure Adequate Insurance Coverage: Insurance plays a significant role in estate protection. Review your insurance policies—homeowners, life, health, auto, and even long-term care insurance—to ensure your coverage is adequate for your needs. An unexpected event can cause a huge financial burden on your loved ones if they aren’t properly insured.

Estate planning can be complex, and the laws surrounding it vary by location. It’s a good idea to work with an estate planner, financial advisor, or attorney to ensure that your estate plan is comprehensive, legally sound, and tailored to your specific situation.

The content provided in this blog is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by JVB. JVB does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. JVB does not warrant any advice provided by third parties. JVB does not guarantee the accuracy or completeness of the information provided by third parties. JVB recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

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