A New Years Financial Checklist
As we welcome 2025, it is easy to focus on parties, football and food. These things are great. However, it’s a wise idea to spend equal time creating a logical and disciplined financial roadmap for the year ahead. Focusing on a few major issues can make significant progress in improving your financial picture.
First, compile a net worth statement in a realistic manner. This is a simple list of all your assets and liabilities.
Now prepare a second list with only liquid assets—but all your liabilities. This is reality. Often, we fool ourselves regarding the liquidity and value of illiquid assets. You won’t know what a piece of land, a lake house, car, boat, collectible or other illiquid asset is truly worth until you try to sell it.
Make goals for your liquid assets and put them in writing. How much do you want to increase your liquid assets and how much are you going to pay down liabilities?
If you carry credit card balances, make a plan to pay them off. Keep them at zero. Determine what it takes to get there by setting aside a bit each month or paycheck. If you try to do it all at once, it is tough to complete.
Your assets exist to serve you. As such, a healthy cushion of cash and securities offers flexibility. In thinking through this, don’t pattern your life after your neighbor or a social media influencer. Social media posts are a performance, not a documentary. Behind closed doors, reality is far different than what is apparent by shiny cars, a big house or exotic trips. Focus on improving financial stability as opposed to having a big show.
Saving needs to be your number one budget item. If you respect “saving/investing” as the most important bill to pay, you will do it. If savings is an after-thought, then most likely something else will consume those assets and you’ll make no progress.
Determine how much you need in emergency funds. If you have appropriate insurance for home, auto and health, then six months of living expenses in cash is usually sufficient. However, if you are a worrier, or work in a cyclical industry like the oil field, consider bumping that figure to nine or twelve months of living expenses.
There is a constant parade of hucksters waiting to take your money for the latest “get rich quick” scam. Slow down and ask lots of questions. If it sounds too good to be true, it usually is. Rarely is there a need for fast decisions. Request full disclosure of fees and conflicts of interest in writing. If they won’t put it in writing, don’t do it.
Map out what is necessary to fully fund your 401(k), IRA or other retirement plans. Contribute enough to receive your employer’s full match. If you have a non-employed spouse at home, fund an IRA for them, too. If you make too much to contribute directly to a Roth, consider converting part of your traditional IRA to a Roth.
Check beneficiary designations on bank, brokerage or life insurance accounts. Any account with a beneficiary designation supersedes the language in your will. As such, they need to be properly coordinated and reviewed annually.
Sit down with your insurance agent to review liability coverage. Making money is relatively easy in our society. However, you are at risk for losing hard earned assets if you don’t have properly structured catastrophic risk management in place.
Map out your Instruction Manual for Life. If you are dead or incapacitated tomorrow, will your loved ones know who to call, what assets you have or what your wishes are? If not, write it out and let loved ones know where you keep this document.
It is guaranteed that stock market assets will be bumpy. Be realistic about your ability to handle volatility. Invest in volatile assets based upon where you want to be in ten or more years. Don’t try to time the market, jumping in and out every week. In the short term, the stock market offers quick liquidity. The more liquidity you demand over a short time frame, the crazier the potential outcomes. Over long-time frames, stock values follow earnings.
As we celebrate 2025, a small amount of attention to these matters will better position you and your family for a healthy, wealthy and wise new year.