As we move into 2025, forming strong financial habits can play an important role in staying on track with your goals. In a constantly changing financial environment, small, consistent actions—like automating savings, managing spending, and reducing debt—can help you feel more in control and better prepared for the future. 

Developing habits that align with your financial priorities doesn’t require drastic changes. By focusing on practical, achievable steps, you can work toward improving your financial health over time. In this post, we’ll share actionable strategies to help you build habits that last, so you can navigate the year ahead with confidence. 

1. Start with a Financial Health Check

Understanding your current financial situation is an important first step toward building better habits. Taking a closer look at your income, expenses, savings, debt, and investments can help you identify areas that may need more attention and guide your financial decisions. 

Assess Your Current Financial Situation 

Break down key aspects of your finances: 

• Income: Total earnings from all sources. 

• Expenses: Fixed costs (e.g., rent, utilities) and variable spending (e.g., dining, entertainment). 

• Savings: Emergency funds, retirement accounts, or other savings. 

• Debt: Credit card balances, loans, and mortgages. 

• Investments: Retirement plans, brokerage accounts, and other assets. 

Tools that can simplify this process: 

• Budgeting apps (e.g., Mint, YNAB) 

• Financial dashboards through your bank or credit union 

• Spreadsheets for manual tracking and review 

By breaking everything down, you’ll gain a clearer view of where your money is going and where adjustments may be helpful. 

Set Clear Financial Goals for 2025 

Once you’ve assessed your current finances, think about what you want to prioritize in the short-term (e.g., building an emergency fund), mid-term (e.g., paying off high-interest debt), and long-term (e.g., saving for retirement). 

Consider using the SMART framework to clarify your goals: 

• Specific: Define what you want to achieve (e.g., “Save $6,000 for emergencies”). 

• Measurable: Include ways to track progress (e.g., “Save $500 each month”). 

• Achievable: Make sure the goal aligns with your current financial situation. 

• Relevant: Focus on goals that matter to your financial priorities. 

• Time-bound: Attach a realistic timeline (e.g., “By December 2025”). 

Taking the time to assess your finances and set clear, practical goals can provide direction as you work toward building better financial habits. 

2. Automate Your Savings and Investments

Automation can simplify saving and investing by creating consistency and reducing the need for ongoing decisions. By setting up automatic processes, you can make it easier to prioritize your financial goals while minimizing the risk of forgetting or delaying contributions. 

Why Automation Works: 

• Consistency: Automatic transfers allow you to save or invest regularly. 

• Reduces Decision Fatigue: Automation removes the need to decide each month how much to save or invest. 

• “Out of Sight, Out of Mind”: Moving funds automatically can reduce the temptation to spend them elsewhere. 

Steps to Automate: 

• Set Up Automatic Transfers: 

• Schedule recurring transfers from your checking account to savings, retirement, or investment accounts. 

• Tools like bank auto-transfers or budgeting apps can simplify this step. 

• Leverage Employer-Sponsored Retirement Plans: 

• Contributing to an employer-sponsored plan, such as a 401(k), can be an effective way to automate retirement savings. 

• If your employer offers matching contributions, participating may provide additional value. 

Invest Regularly with Dollar-Cost Averaging: 

• Dollar-cost averaging involves investing a fixed amount at regular intervals, regardless of market conditions. 

• This approach helps spread out your investment purchases over time, reducing the need to focus on market timing. 

• Setting up automatic contributions to retirement or brokerage accounts naturally supports this strategy. 

Automating your savings and investments can help streamline your financial routines, making it easier to stay consistent without constant manual effort. 

3. Build a Realistic Spending Plan (Not Just a Budget)

Traditional budgets often focus on limiting spending, but a realistic spending plan goes a step further. It aligns your financial decisions with your values and goals, offering more flexibility while still helping you manage your money effectively. 

The Difference Between Budgeting and Spending Plans: 

• A budget typically outlines limits for different categories, which can sometimes feel restrictive. 

• A spending plan focuses on making intentional choices with your money, so it aligns with what matters most to you—whether that’s saving for retirement, paying down debt, or enjoying experiences that bring value to your life. 

By shifting the mindset from restriction to alignment, spending plans can feel more manageable and sustainable over the long term. 

Track and Cut Non-Essential Expenses: 

• Start by reviewing where your money is currently going. Look for non-essential or unused expenses, such as: 

• Subscriptions you no longer use (streaming services, apps). 

• Dining out, impulse purchases, or other discretionary spending. 

• Tools to simplify tracking: 

• Subscription Audits: Apps like Truebill or Rocket Money identify and cancel unused subscriptions. 

• Cash Flow Trackers: Tools like Mint or PocketGuard help monitor income and spending patterns. 

Reallocate Savings: 

• Once you identify areas to cut back, consider redirecting those funds toward activities that align with your goals, such as: 

• Building an emergency fund. 

• Increasing contributions to retirement accounts. 

• Paying down high-interest debt. 

• Adding to investment accounts. 

A realistic spending plan helps you make more deliberate financial decisions, balancing what you need today with what you’re working toward for the future. 

4. Prioritize Debt Management

Managing debt effectively can help free up resources for savings, investing, and other financial goals. By understanding the types of debt you carry and creating a plan to reduce it, you can take steps toward improving your overall financial health. 

Understand Your Debt 

Not all debt is the same, so it’s important to differentiate between: 

• High-Interest Debt: Credit card balances, personal loans, or other debts with high-interest rates can quickly become costly if left unchecked. 

• “Good Debt”: Mortgages or student loans often come with lower interest rates and can support long-term financial goals like homeownership or career growth. 

Knowing the types of debt you’re managing can help you prioritize which to pay off first. 

Create a Plan to Tackle Debt 

There are two widely used strategies for paying down debt: 

1. Debt Snowball: Focus on paying off the smallest debt first while making minimum payments on others. Once the first debt is cleared, apply that payment toward the next smallest balance. This method can build momentum and motivation. 

1. Debt Avalanche: Prioritize paying off the debt with the highest interest rate first, while making minimum payments on the others. This approach can save more money over time by reducing interest costs. 

Choose the method that works best for your financial situation and motivation. 

Avoid Lifestyle Inflation

When income increases, it’s easy to let spending rise as well. Instead of upgrading your lifestyle immediately, consider using raises, bonuses, or other increases to: 

• Pay down debt faster. 

• Build your savings or retirement contributions. 

• Invest in wealth-building opportunities. 

Focusing on debt management can help reduce financial stress and give you more flexibility to work toward other financial priorities. 

5. Build and Protect an Emergency Fund

An emergency fund serves as a financial safety net, helping you cover unexpected expenses without disrupting your long-term financial goals. Whether it’s a medical bill, car repair, or job loss, having savings set aside can help you avoid dipping into investments or taking on additional debt during challenging times. 

Why an Emergency Fund is Critical for Wealth-Building: 

• Unexpected events can arise at any time, and without a buffer, you may need to rely on credit cards or loans, leading to costly interest payments. 

• Having funds readily available can help you stay on track with your long-term plans, like saving for retirement or paying down debt, without setbacks. 

How Much to Save: 

• A common guideline is to save three to six months’ worth of essential expenses, such as: 

• • Housing (rent/mortgage). 

• • Utilities. 

• • Groceries. 

• • Insurance and loan payments. 

• The exact amount will depend on your personal circumstances, including job stability and other financial commitments. 

Where to Keep It: 

• Emergency funds should be accessible and low risk so that you can use them when needed. Consider: 

• • High-Yield Savings Accounts: These offer liquidity and earn a modest return on your balance. 

• • Short-Term Certificates of Deposit (CDs): For funds you’re confident you won’t need immediately; short-term CDs may provide slightly higher interest rates. 

By building and protecting an emergency fund, you create a layer of financial security that allows you to handle life’s uncertainties while staying focused on your broader financial goals. 

6. Make Tax Efficiency Part of Your Strategy

Incorporating tax efficiency into your financial habits can help you optimize savings and plan for long-term goals. Understanding how tax-advantaged accounts work and balancing your savings across different types of accounts may provide flexibility when you need it in the future. 

Understand Tax-Advantaged Accounts

Tax-advantaged accounts can reduce taxable income or allow for tax-free growth, depending on the account type. Consider exploring: 

• 401(k)s: Employer-sponsored retirement plans allow pre-tax contributions, which can lower taxable income. Some employers may also provide matching contributions. 

• IRAs (Traditional and Roth): Traditional IRAs may offer tax deductions now, while Roth IRAs allow for tax-free growth and withdrawals later. 

• HSAs (health savings accounts): For those with high-deductible health plans, HSAs offer tax benefits for saving and paying for qualified medical expenses. 

Plan for Tax Diversification

Balancing your savings across different account types can provide options to manage taxes over time: 

• Pre-Tax Accounts: Traditional 401(k)s and IRAs provide immediate tax benefits but withdrawals are taxed later. 

• Roth Accounts: Roth IRAs and Roth 401(k)s are funded with after-tax dollars but allow for tax-free withdrawals in retirement. 

• Taxable Accounts: Brokerage accounts don’t have tax advantages but offer more flexibility for accessing funds. 

Having a mix of account types can make it easier to adapt to changing tax circumstances or financial needs in the future 

Work With a Financial Professional

Tax strategies can involve multiple factors, including current tax laws and personal financial goals. A financial professional can help: 

• Review your current tax situation and suggest adjustments. 

• Identify opportunities for contributions to tax-advantaged accounts. 

• Provide guidance as tax laws or your financial circumstances evolve. 

Focusing on tax efficiency can help you better manage savings and investments while keeping future tax implications in mind. 

7. Educate Yourself and Stay Informed

Staying informed and continuously improving your financial literacy can help you make decisions that align with your goals, especially as economic conditions and personal circumstances evolve. Taking the time to educate yourself can provide greater clarity and confidence when managing your finances. 

Commit to Continuous Financial Education

Expanding your understanding of financial concepts doesn’t have to be overwhelming. Consider resources that fit your learning style and schedule: 

• Books: Look for titles on personal finance, investing, or wealth-building strategies. 

• Podcasts: Financial podcasts can provide practical insights while fitting into your daily routine. 

• Financial Professionals: Working with a financial professional can help you gain personalized guidance and a clearer understanding of your financial picture. 

Understand Your Investment Portfolio

Regularly reviewing your investment portfolio can help you assess whether it still aligns with your goals and risk tolerance. Key areas to focus on include: 

• Diversification: Spreading investments across asset classes (e.g., stocks, bonds, real estate) can help manage risk. 

• Annual Reviews: Market shifts or changes in your life may require adjustments to your portfolio, such as rebalancing assets or exploring new investment opportunities. 

Stay Updated on Economic Trends for 2025

Economic and legislative changes can influence financial strategies, so keeping an eye on developments may help you prepare and adapt. Areas to watch include: 

• Interest Rates: Changes in rates can affect borrowing costs, savings yields, and investment returns. 

• Tax Updates: New legislation may impact retirement contributions, deductions, or tax brackets. 

• Market and Policy Changes: Broader economic trends could present opportunities or challenges for saving and investing. 

Staying informed can help you adjust your strategies as needed so they remain aligned with your priorities in an evolving financial landscape. 

8. Regularly Review and Adjust Your Financial Plan

Financial plans aren’t static—they need to evolve with your life and the world around you. Regular check-ins can help you assess your progress, adapt to changes, and strike a balance between building for the future and living well today. 

Schedule a Financial Check-In

Set aside time for regular reviews to stay on track with your financial goals: 

• Monthly Reviews: Monitor your spending, savings, and any adjustments needed to stay aligned with your plan. 

• Quarterly Reviews: Take a closer look at your overall progress, such as debt reduction, savings growth, and investment performance. 

These check-ins provide an opportunity to catch small issues early and make adjustments where necessary. 

Adapt to Life Changes

As circumstances change, your financial plan may need to adjust. Some examples include: 

• Major Life Events: Marriage, a new child, career changes, or a home purchase may shift priorities for saving, spending, and insurance coverage. 

• Income Changes: Pay raises or new sources of income might create opportunities to increase savings or pay down debt. 

• Evolving Goals: Over time, your financial goals may change, requiring updates to your approach to investing, retirement planning, or risk management. 

Work Toward Balance:

While it’s important to plan for the future, finding balance allows you to enjoy life today. Consider: 

• Setting realistic goals that leave room for both saving and discretionary spending. 

• Prioritizing experiences or investments in areas that align with your values. 

Regularly reviewing and adjusting your financial plan helps keep it relevant and flexible, allowing you to navigate life’s changes while working toward your long-term priorities. 

Conclusion

Building strong financial habits takes time, consistency, and regular adjustments, but even small steps can lead to meaningful progress over time. By assessing your current financial situation, automating savings, managing debt, and staying informed, you can create a framework that supports your goals for 2025 and beyond. 

Everyone’s financial situation is unique and working with a financial professional can help you create a strategy tailored to your needs and priorities. Whether you’re looking to optimize savings, plan for retirement, or adapt to changes in the economy, personalized guidance can provide clarity and help you make informed decisions as you move forward. 

Standard Disclosure 

This blog expresses the author’s views as of the date indicated, are subject to change without notice, and may not be updated.  The information contained within is believed to be from reliable sources.  However, its accurateness, completeness, and the opinions based thereon by the author are not guaranteed – no responsibility is assumed for omissions or errors.  This blog aims to expose you to ideas and financial vehicles that may help you work towards your financial goals. No promises or guarantees are made that you will accomplish such goals.  

Past performance is no guarantee of future results, and any expected returns or hypothetical projections may not reflect actual future performance or outcomes. All investments involve risk and may lose money. Nothing in this document should be construed as investment, tax, financial, accounting, or legal advice. Each prospective investor must evaluate and investigate any investments considered or any investment strategies or recommendations described herein (including the risks and merits thereof), seek professional advice for their particular circumstances, and inform themselves about the tax or other consequences of any investments or services considered.   

References

Hayes, Adam. (May 23, 2024). Dollar-Cost Averaging (DCA) Explained with Examples and Considerations. Investopedia. https://www.investopedia.com/terms/d/dollarcostaveraging.asp