Despite closing out the year on a down note, the S&P 500 was up 23% for 2024. Many analysts are predicting a 10% total return for 2025, which is much closer to the average annual return.
As we start the new year, many of us are starting resolutions and some of us have already stopped working on those resolutions. It’s important to realize that our financial, physical, and mental health are all intertwined. Financial stress impacts your health. And the same things that apply when starting a new fitness routine or diet apply with financial goals.
If one of your 2025 goals is to get in better financial shape, start with figuring out where you are now. Make a list of your assets, or what you own, and your liabilities, or what you owe. Use your year-end credit card reports and your checking account statements to see what you’re currently spending. Where does your money go each month? Finally, where do you want to be at the end of 2025? Are you focused on paying off debt, building savings, or another goal like increased travel or buying a boat?
No matter what your goal is, start small. Just like a new strenuous work-out routine or a crash diet, extreme budgeting is hard to maintain over a long period of time. Instead, consider small, manageable changes. What is one small thing that you can do? Can you get a second job 2 days a month, or a side hustle? Have a yard sale and put the proceeds towards your goal?
Put other changes on auto-pilot. If you want to increase savings, ask your company to direct $10 a paycheck towards your savings account. After a few months, increase that amount. For retirement, increase your 401(k) or TSP contribution by 1%. Set up an automatic transfer of $25 a month into a Roth or 529 account.
If you want to control spending, start by being conscious of where your money currently goes. Where are you willing to cut back? Just like the person who declares they will get up and work out every morning before work, only to hit the snooze alarm day after day, you have to focus on the goal. You could go out to dinner, or order DoorDash. But if you stop and think about what you want more – the big savings account, the trip, being debt free – it’s easier to choose between two things than to just deny yourself.
Finally, that which is measured improves. If you really want to hit your goals, put up a chart somewhere visible, like your refrigerator or in the shower. Every time you make a payment towards your debt, or transfer money to savings, update the chart.
Your action item this week is to write down your goals for 2025. Put them in an envelope and tuck them away until the end of the year.
Be sure to check out our website at covingtonalsina.com, or our Facebook page, for more information and to register for our upcoming educational events.
CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.