Five Resolutions for a Prosperous New Year
After the overindulgence of the holidays, many commit to New Year’s resolutions such as exercising more, eating healthier, or drinking less alcohol. While these goals are fantastic for personal health, what about your financial health?
This year, consider setting financial resolutions that lead to long-term security and peace of mind. Below are five resolutions designed to build upon each other: improve financial literacy, audit expenses, save more, boost retirement contributions, and utilize a health savings account (HSA).
Improve Financial Literacy
My mother loves to say, “Knowledge is power.” Unfortunately, financial literacy is not taught in most schools. Instead, we rely on our parents or learn the hard way through trial and error.
A study by the TIAA Institute found that when asked three basic questions about interest rates, inflation, and risk diversification, only 16% of millennials answered all correctly. Older adults (ages 38–64) fared slightly better, with 34% answering all correctly.
Financial literacy is a life skill that prevents mistakes, prepares for emergencies, and helps you achieve your goals with confidence.
Make a resolution to improve financial literacy in 2025. Commit to reading at least three personal finance books. In doing so, commit to reading just ten pages per day. If I could recommend just one, it is The Psychology of Money by Morgan Housel. You can also explore free online courses through platforms like Coursera.org or listen to personal finance podcasts.
Audit Expenses
Every organization conducts audits to ensure efficiency. Do the same for your finances. Gather all your financial data, such as bank and credit card statements. You can use budgeting apps like Mint or YNAB or even go old-school by printing statements and categorizing your spending manually.
Organize expenses into categories like housing, transportation, food, entertainment, and savings/debt. You’ll quickly identify areas to cut back, such as unused subscriptions, buying lunch instead of packing it, or impulse purchases.
You might also find opportunities to negotiate better rates on recurring expenses like insurance or cable. Call providers about discounts or bundling options, and ensure your policies align with your current needs.
For a more structured approach, consider adopting the 50/30/20 rule:
- 50% of income for needs (housing, groceries)
- 30% for wants (entertainment)
- 20% for savings and debt repayment
Auditing expenses creates financial clarity and frees up money for other needs.
Save More
After auditing expenses, you may find an extra $100 or more in your monthly budget. Use this newfound money to build and strengthen emergency funds.
According to research by Empower, 37% of Americans cannot afford an unexpected expense over $400, and nearly 21% have zero emergency savings. The standard recommendation is having 3–6 months’ worth of essential expenses. However, your personal savings goal should be tailored to your unique situation. Consult with a financial advisor for guidance.
Set up automatic transfers to a high-yield savings account to make saving effortless.
Boost Retirement Contributions
Once you’ve established a solid emergency fund, focus on increasing retirement contributions.
The National Institute on Retirement Security reports that 55% of Americans worry they won’t achieve financial security in retirement. Social Security can help, but it is merely a supplement to retirement savings.
If you’re currently contributing 5% of salary to your 401(k), consider setting up automatic annual increases of 1%. This small change is easy to overlook in your paycheck but can have a huge impact over time.
Maximize your employer’s match, if offered, and explore options like a traditional or Roth IRA to further boost your retirement savings. Work with your financial advisor to create a retirement strategy that aligns with your goals.
Leverage a Health Savings Account (HSA)
The health savings account (HSA) is my favorite financial tool because it offers triple tax benefits:
- Contributions are tax-deductible.
- Growth is tax-free.
- Withdrawals for qualified medical expenses are tax-free.
If you’re enrolled in a high-deductible health plan, you’re eligible to open an HSA. In 2025, individuals can contribute up to $4,300, and families can contribute up to $8,550.
Unlike flexible spending accounts (FSAs), HSA funds roll over indefinitely, making them an excellent tool for saving for future healthcare costs or supplementing retirement. After age 65, you can even use HSA funds for non-medical expenses, though they’ll be taxed like a traditional IRA.
Conclusion
Emphasizing your physical health in 2025 is a great start. But why not add financial health goals as well? By improving financial literacy, auditing expenses, saving more, boosting retirement contributions, and leveraging an HSA, you can set yourself up for a prosperous future.