Six ways to set yourself up for success in 2025

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Revisiting your finances at the start of a new year may not seem as exciting as making other resolutions, such as exercising more or taking steps to reduce stress in your life, but it’s important to remember that your financial wellness is often closely connected to your physical and mental health.¹

The good news: Improving your financial wellbeing can be easier than you might think. Here are six simple steps you can take to help set yourself up for financial success in 2025 and beyond.

Start the year by revisiting your budget. Assess your average monthly income, as well as your fixed and variable expenses, and determine your financial priorities for 2025 to develop your ideal budget. Reassessing your spending plan is critical now, as you’re likely to spend more on everyday items like groceries or gas with continued inflation.

This exercise can help you determine your top priorities for 2025. For example, maybe you’re looking forward to putting extra income toward a bucket-list vacation over the summer. Or perhaps you’re planning to save even more for retirement.

If you’re having trouble getting started, this worksheet can help.

It’s always a good idea to double-check that you have adequate funds set aside for a rainy day—that’s especially true in times when the economy may be slowing from its once-robust pace. Economic growth has slowed this year, with gross domestic product (GDP) expanding at just 2.8% in the third quarter of 2024, down from 3% in the second and 4.4% in the third quarter of 2023.²

Particularly in an uncertain economy, an emergency fund can help keep you financially afloat in unforeseen life circumstances, such as a change in your or a loved one’s employment situation.

A general rule of thumb for an emergency fund is saving three to six months’ worth of living expenses in a safe, liquid account. But your lifestyle can change over time, so if you have an emergency fund 

Even if you’re already good about managing debt, consider taking steps to help reduce and consolidate it further. For example, if you’re expecting a raise or year-end bonus, consider applying the extra income to any loan or credit card balances with high interest rates.

Then, think about consolidating any remaining debt, which can let you swap the varying interest rates on multiple loans, credit lines, or cards for a potentially lower rate on a single loan. Reducing the number of loans you carry can also help simplify your financial life and ease monetary stress.

Check whether you’re still on track toward your goals, such as saving and investing for a comfortable retirement.

It’s important to revisit your retirement savings every year to see where you currently stand, understand how much more you want to accumulate, and make any adjustments to your lifestyle and budget to help stay on track. If you don’t have a retirement plan, now may be a good time to create one.

The retirement planning calculator can help you create a personalized plan and track your progress. Working with a Financial Advisor could also help.

And if you’ve changed jobs like many have over the last few years, you may want to consider consolidating your old employer-sponsored retirement plan into an IRA or into your new employer’s retirement plan.

Be sure to check whether you’re still tracking toward your investing goals too. It may be helpful to ask questions like:

• Can I create or contribute to other accounts, like a 529 plan to help a younger loved one save for future education expenses?
• When is the last time I revisited my asset allocation? The start to a new year can also be a good time to revisit your investment strategy and asset allocation to help ensure your portfolio is diversified across stocks, fixed income, cash, and other asset classes.
  • Consider learning more about how options or futures could help you navigate today’s markets. Adding futures to your trading strategy offers unique opportunities to diversify across more than 70 asset classes and manage risk around the clock, while options could offer the flexibility you need to manage portfolio volatility more effectively.
  • If you’re a new investor without a lot of experience or you prefer to delegate your own investing, E*TRADE’s robo-advisor, Core Portfolios, lets you select your risk profile and then uses an algorithm to automatically invest and manage your assets for you.
• Am I investing in the causes I care about? If you’re passionate about specific causes like environmental sustainability and diversity equity and inclusion or you’re interested in long-term investment trends shaping the world we live in, consider E*TRADE from Morgan Stanley’s thematic ETFs.

The New Year can also be a good time to review and consider updating and reviewing any life insurance policies to ensure it meets your current financial needs.

If you are wondering when you may need life insurance, these factors can help you decide. If your employer does not offer life insurance benefits, consider purchasing an individual policy to bridge the gap.

Major life events such as marriage, divorce, having children, buying a home, or staring a business can prompt a need for certain types of insurance coverage, as can changes in income, debt, or financial goals. An annual review helps confirm that your existing policy reflects your current life situation and provides the right level of protection for your loved ones. It’s also important to make sure your beneficiary designations are up to date.

Article Footnotes

¹ Soomin Ryu, Lu Fan, “The Relationship Between Financial Worries and Psychological Distress Among U.S. Adults,” Feb. 1, 2022.

² https://www.bea.gov/news/2024/gross-domestic-product-third-quarter-2024-advance-estimate

The source of this Morgan Stanley article, 6 Ways to Start Fresh Financially in 2025, was originally published on November 18, 2024.

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