A Financial Checklist for the New Year: Getting Off to a Fast Start in 2025

Plan ahead for life changes

As the saying goes, “change is the only constant.” With that in mind, think about any life changes you may have planned for the coming year, such as buying a home, paying for education or looking toward retirement. While life is bound to throw you an occasional curveball in the coming year, planning ahead for events you expect to happen can help you make sure you are well positioned for the next big life event.

Review your insurance policies

About those curveballs: Life has a way of throwing them. While you should always start by planning for things to go right, the best plans help to make sure you and your loved ones are ready for whatever comes your way. That’s why managing risk has a vital role in your financial plan. If you had a big life event in the past year or expect significant changes in your life during the coming year, you may need additional insurance coverage to keep your finances secure if you were to pass away unexpectedly or if you became disabled and couldn’t work. You may also want to consider long-term care solutions as you look to protect what you’ve saved for retirement. Your Northwestern Mutual financial advisor can work with you to evaluate whether your coverage levels fit with where you are in your life.

Review your spending plan

Once you’ve set your goals for the year and identified potential changes in your life, make sure your budget is aligned with your plans. To do this, you need to know how much money you bring in each month and how much you’re spending. Knowing how you spend your money can help you recognize whether your spending patterns align with your long-term goals. If you use credit cards, the issuer may be able to provide you with a year-end snapshot of your spending by category, which can be a great starting point in identifying your spending trends.

Fine-tune your budget

After you’ve run the numbers, see if there are any areas where you might need to adjust your spending levels to free up more money for your goals. That doesn’t mean you have to give up the things that matter to you; it simply means prioritizing your spending to put yourself in a better position to achieve the financial milestones important to you.

Consider your college savings plans

If you’re helping someone save for college and already have a college savings plan, good for you; you’re on the right path! If not, now is a good time to open one. Assets in a 529 plan grow tax-deferred and, if used for education expenses, are free from taxes on gains. Some states may even offer a tax deduction for contributing to a 529 plan, depending on the state you live in and the state plan you contribute to.

Make a plan to tackle any outstanding debt

While it’s easy to focus your efforts on spending and saving, it’s also important for you to have a plan for any outstanding debt you may have. While using debt can be smart in some situations, eliminating or minimizing expensive forms of debt such as credit cards can help you reach your financial goals more quickly. If you’re feeling stuck coming up with a plan of where to start, one useful debt management strategy, known as the debt avalanche method, is to tackle any high-interest debt first. There are other strategies that have proven effective, and your advisor can work with you on deciding which one best fits your needs.

Get a head start on planning for your taxes

After a busy holiday season, getting ready for tax season may not be high on your list of things you want to tackle. However, you can start your tax-season prep work simply by getting organized. Starting now to gather your tax documents, including W-2s, 1099 forms and receipts for any tax deductions, can prevent last-minute scrambling and save you from stress later on.

Once you’ve filed, consider how your tax situation impacts your financial plan. If you are expecting a large refund, work with your financial advisor to figure out how to use the windfall to help make additional progress toward your goals. On the other hand, if you find you owe money, consider changing your tax withholding so that the amount of money taken out of your earnings aligns more closely with the amount due next year.

Review tax-favored account contributions

If you are already contributing to tax-advantaged accounts, such as a traditional IRA, 401(k) or Health Savings Account (HSA), you’re off to a great start. By reviewing your tax-advantaged contributions against IRS limits for 2024, you may identify additional opportunities to lower the portion of income that is taxed. By doing so, you’ll be giving yourself time to make any final retirement contributions for the previous year before the April 15 deadline, which can help you reduce the amount of your income that is subject to tax.

Additionally, with your new budget in place, now is a good time to review the amount you plan to contribute in the year ahead. Tax law is always changing, including contribution and income limits. For example, in 2025, subject to income limitations, you can contribute up to $7,000 to an IRA and $23,500 to a tax-favored retirement plan through work, such as a 401(k) or 403(b). Your advisor can work with you to help determine whether any limits may apply to your specific situation.

Consider streamlining and automating your investments

If you’re celebrating a new job as you look back at the past year, it may mean you have a 401(k) or other retirement savings plan you left behind at your previous employer. As you map out your financial moves for the new year, you may want to consider rolling retirement savings from past employers into your current company’s plan (if allowed) or rolling it over into an IRA.

The new year can be a good time to automate your investment contributions if you haven’t done so already. This eliminates one more thing that you need to regularly think about and is an easy way to maintain healthy investment habits. You may also consider automating increases to the amount you contribute each year. By setting up annual automatic increases in your contributions, you can seamlessly make the most of any annual raises you receive over the years.