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Financial Planning Action Steps to Take in the New Year

With the arrival of a new year, there is an opportunity to build on the year before. Hopefully, for you 2024 was a great financial year, filled with wins. The beginning of 2025 is a great time to lock in that progress and build on it. Maybe 2024 wasn’t the step forward you were hoping it would be; there is an opportunity to start fresh and make a leap forward in 2025. Here are some steps to take to both finalize your last tax year, as well as set yourself up for success in the year ahead.

First, to taxes. Yes, it seems like this is the topic that never goes away, but April 15^th is not far off! There are still some things you can do to impact 2024, as well as some steps to take to make tax time easier going forward.

• Take advantage of strategies that could lower your tax bill for last year (or possibly some tax bills in the future!).
  • IRA contributions for 2024 must be made by April 15, 2025. That means you could still lower your tax bill by contributing to a Traditional IRA, or save some funds in a Roth IRA (that, if you follow the rules, won’t be taxed in the future).
• Make HSA contributions.
  • Health Savings Accounts also have a funding deadline of April 15^th for the prior year. This can be a good way to lower your taxes, and you can use the funds for qualified medical expenses in future years.
• Business owner? Make a profit-sharing contribution.
  • You have until your filing deadline (and that includes any extensions) to make a profit-sharing contribution to a retirement plan. These can be substantial amounts you could move to tax-deferred accounts and not get taxed on this tax year.
• Begin compiling all your tax documents as they come in.
  • Either with a physical folder or one on your computer, grab all your tax documents as you receive them in keep them in one place. This can make the tax process easier, if you’re using a CPA or doing them yourself.
  • As you are compiling the forms for last year, begin making a list of items that will apply for the year ahead as well.
    • As you open new accounts, change jobs, have another deduction, give to charity, etc., keep the list updated. It cuts down on the time spent looking things up next April.

Now on to some other general planning topics. A lot of these are steps that you can take at any point throughout the year but doing them now early on can have a bigger impact.

• Look at the year ahead and make note of any large bills you know will be coming (vacations, personal property taxes, real estate taxes, insurance renewals, etc.). Large items like this can wreak havoc on a monthly budget or cash flow and can be discouraging when months’ worth of savings get wiped out with one bill. Make sure you’re planning around these items too, setting some money aside each month.
• Set short term goals.
  • A lot of times, people will come up with their “financial goals for the year”. This works for some, but for others, it can be hard to keep the full year in focus all the time. Setting a goal for saving a certain amount of money isn’t very immediate; setting a goal to save X amount by the end of the first quarter makes each pay period and month matter more.
• Change some habits.
  • A lot of times, what is “saved” is whatever is left over at the end of the month. A better process is to pay yourself first. Move your savings goal to the top of your budget; make that the first “bill” that you pay, moving your goal over to a savings account each month to get that sense of accomplishment.

None of these steps is earth shattering, but very rarely is there one step to take that will make or break your financial life. It’s small steps, consistently taken, that have a big impact years from now. Take a step or two and make the most of 2025.

We do not provide tax advice and recommend reviewing tax matters with your CPA.

Make sure your contributions to retirement plans and HSAs take into account the new maximum contribution limits; note that there is a special catch up for those of us age 60-63.