As 2025 rapidly approaches, you may already be planning your New Year’s resolutions. And if your goal is to be financially smarter this year—Congratulations! You’re already ahead of the curve by a mile.
So, how can you start 2025 financially strong? Simply deciding on a goal isn’t enough. According to Baylor College of Medicine, 88 per cent of people fail their resolutions within the first two weeks of the year. Poor planning and lack of discipline are the usual culprits.
If you want to get finances right in 2025, what you need is a game plan to keep you on track. Here are some smart tips to help you meet your financial goals for the new year.
Why is Financial Planning Important?
A financial plan is a personalised strategy that helps you meet your short and long term financial goals. It provides much-needed direction to the way you spend and save money and helps you
Financial planning can help you prioritise your financial resolutions for the new year. It helps identify potential financial risks as well as help you plan for emergencies.
Your New Year Financial Planning Checklist
1. Set clear financial goals from the start
Your new year financial planning should begin with a clear visualisation of what your financial goals are.
Are you looking to buy a bike? Are you hoping to pay off a certain debt? Do you simply wish to increase your savings?
Setting clear goals will help you plan your next steps, such as looking up loans or investment options. For long-term financial goals, like buying a house or saving up for retirement, plan the steps you can take this year to help you meet your goal in the long term.
Ensure that your financial goals are SMART—specific, measurable, achievable, realistic, and time-bound.
2. Revisit past year’s expenses
Reflect upon all your spending in the past year. What were the major areas where you spent most of your money? Did you invest in diversified assets? Were there any major financial purchases that you regret now?
Look out for recurring spending that looks innocuous but quickly adds up over time, such as OTT subscriptions. Additionally, review your debts and credit score.
The goal is to evaluate your financial decisions in the past year and decide upon what you did well and where you can improve.
3. Identify and track essential and nonessential purchases
Nonessential and impulsive purchases are two of the most common reasons people end up in financial trouble.
According to Schwab, 64% of people regret spending on short-term pleasures such as clothing or gadgets.
Identify all the areas where you spend money and sort them into categories—essential (groceries, rent, insurance, etc.) and non-essential (frequent takeout food, memberships you don’t regularly use, etc.).
Maintaining a financial tracker helps meet your financial goals for the new year. A tracker keeps you up to date with all recurring spendings such as your rent, utilities, and insurance, and helps plan your expenses ahead of time.
When allocating your budget for the coming year, follow the 50-30-20 rule. Post-taxes, split your budget into three categories: spend 50% of your income on essential needs and expenses, save 20%, and spend the remaining 30% on nonessential wants.
4. Plan for any major life changes that may occur in the coming year
Major life changes, such as getting married, moving to another city, and planning a career change, are often accompanied by increasing expenses, which you usually wouldn’t account for.
See if you have any such major events in 2025 and plan your expenses accordingly. You may want to create a separate budget, build an emergency fund, and think about financing options.
5. Ensure you have sufficient funds for emergencies.
Disasters like medical emergencies or a sudden job loss can strike one at any moment. Always have a certain sum of money set aside for financial emergencies and unexpected expenses. It is recommended by experts to save enough to cover six to nine months’ expenses.
Start your year by making small but regular contributions to your emergency fund.
6. Create a debt-tackling strategy
Debt is an aspect of your finances that usually weighs you down. Tackling your debt and consistently repaying what you owe can ease your financial burden in the long run. To do this, begin by calculating how much debt you owe. Note the interest rates, minimum monthly requirements, and payment due dates.
Next, choose a debt repayment strategy. For example, the Debt Snowball strategy focuses on repaying smaller debts first, whereas the Debt Avalanche strategy starts by focusing on the highest-interest debts. Determine which strategy works best for you and commit to stick to it.
7. Effective insurance planning
Insurance planning is key to safeguarding your assets and securing your future against financial adversities. Ensure that you have all of the must-have insurances—life, health, liability, travel, motor, etc.
When selecting an insurance policy, look at all the areas in your life where you may need insurance. Take your dependents into account when choosing a health or life insurance policy. Always make sure to understand the coverage policy and the discounts available and compare benefits between different insurance providers.
8. Plan for a diversified investment portfolio
Smart investors follow the age-old adage, “Don’t put all your eggs in one basket.”
Revisit your investment portfolio and ensure that you are sufficiently managing risk by investing in several different asset classes and industries.
Invest in diverse asset classes such as equity, stocks, bonds, real estate, and gold. You can also diversify within the same asset class.
You can diversify across risk levels by investing in both high-risk (hedge funds, angel investing, etc.) and low-risk investments (high-yield savings accounts, money market funds, etc.).
9. Optimise your tax planning for the coming year
Proper tax planning can help you legally reduce the amount you pay in taxes, so you have more disposable income available. Utilising tax benefits and tax exemptions is a smart way to save money in the coming year. For example, you can avail up to Rs. 1.5 lakh as tax deductions as per Section 80C of the Income Tax Act.
Under the new Income Tax Act, salaried employees can claim standard deduction of Rs. 75,000 on their taxable income, while family pensioners can claim Rs. 25,000. Additionally, a House Rent Allowance (HRA) can be availed by salaried individuals living on rent.
National Savings Certificate, ELSS, and National Pension Scheme are other avenues you can use to optimise your tax planning.
Final Thoughts
New Year financial planning does not have to be complicated. Setting clear goals, following a well-thought-out plan, and regularly tracking your expenses are simple ways to improve your finances and ensure a financially healthy year.
Tata Capital offers expert financial guidance, quick and easy loans with competitive interest rates, insurance policies, and more.
Whether your financial goal this year is to purchase your first car or step up your investment game, Tata Capital can give you the boost you need to have a financially successful 2025.
17 December 2024
6 mins read
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