As the new year begins, many of us take the opportunity to set fresh goals, refresh our routines, and turn over a new leaf. However, one area that often goes overlooked in our quest for self-improvement is our finances. A thorough financial spring cleaning can set you up for success throughout the year—ensuring you’re covered where you need to be, avoiding unnecessary expenses, and strategically planning your future. Below are four steps you can take to tidy up your finances and start the year right.

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1. Review Your Health Insurance (and Other Insurance Plans)

Insurance needs tend to shift over time. Whether due to changes in your personal situation—such as marriage, the birth of a child, or a significant career change—or simply because your existing policy has become outdated, it’s wise to revisit your insurance portfolio regularly. Here’s why:

• Outdated Plans: Insurance companies frequently update and revise their offerings. Over time, you might discover that a new version of your plan offers the same or better coverage at a lower cost.
• Life Stage Changes: As you move through different life stages—single, married, parenthood, nearing retirement—your insurance needs change, too. A plan that was sufficient five years ago might not be the best fit now.
• Coverage Gaps or Overlaps: Reviewing your coverage can reveal gaps (areas where you’re not adequately covered) or overlaps (areas where you’re paying for more coverage than you need). Either of these can cost you more in the long run.

Action Step: Contact your insurance provider or advisor to inquire about new or updated plans, or consult with a financial advisor or insurance specialist who can help you better match your coverage to your current needs.

Note: Did you know that we can help with insurance planning? If you wish, you can even apply for an anonymous consultation with a “tip as you wish” system. This can help you get personalized insights without any sales pressure.

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2. Look at What You Spent in 2024

It’s easy to overlook annual payments when you’re focused on monthly budgeting. However, these once-a-year expenses can significantly impact your financial situation if they catch you off-guard.

• Annual Expenses: This includes costs like travel, insurance premiums (if paid annually), subscriptions, or big-ticket items you purchase once a year.
• Identify Patterns: By reviewing your spending over the last 12 months, you can better spot patterns and areas where you can cut back.
• Set the Baseline: Knowing your total outflow in 2024 helps you plan more accurately for 2025. If you don’t know where you’re starting from, it’s much harder to plan for where you want to go.

Action Step: Pull up your bank statements, credit card statements, and receipts for the past year. Create a simple spreadsheet or use a budgeting app to categorise your spending. Note any surprises or costs you may have forgotten about. These annual numbers will form the basis of your 2025 budget.

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3. Conduct an Investment Review

Whether you manage your own portfolio or work with a professional, it’s crucial to understand how your investments performed and whether they still align with your financial goals.

• Performance Check: Look at each investment—be it stocks, bonds, mutual funds, or ETFs—and assess how it performed over the past year. If any investments underperformed significantly, investigate why.
• Investment Thesis: Reflect on why you chose each investment in the first place. If your thesis is no longer valid (for example, the company’s fundamentals have shifted, or the market dynamics have changed), it might be time to exit or reduce your position.
• Portfolio Balance: Evaluate whether your portfolio is still balanced according to your risk tolerance. Has one segment of your portfolio grown disproportionately? Rebalancing ensures that your portfolio aligns with your target allocation.

Action Step: Update your spreadsheet or investment-tracking tool with the latest performance data. Check if you need to adjust your holdings or diversify further. If you’re unsure, seek guidance from a financial advisor.

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4. Plan Ahead for 2025

Once you’ve reviewed your insurance, tracked your 2024 spending, and assessed your investments, it’s time to look forward. Having a plan for 2025 will keep you on course to reach your financial goals.

• Set or Reassess Goals: Are you still on track to achieve your major milestones—buying a home, paying for a wedding, or funding higher education for your children? Verify if your targets are realistic and if they need any adjustments.
• Prepare for Big Expenses: Anticipate significant costs (e.g., property taxes, travel, or one-time purchases like a new car) and determine if you should earmark extra savings or investments to cover them.
• Investment Time Horizon: If you know you’ll need funds for a goal in the next five years, it might be wise to keep those funds out of volatile investments. A widely accepted rule of thumb is not to invest money in high-risk assets for short-term goals.
• Emergency Fund: Make sure you have an adequate emergency fund—typically three to six months of living expenses. If you depleted your fund last year, prioritise replenishing it early in the new year.

Action Step: Write down your top financial goals for 2025, including target dates and estimated amounts. Then, decide which strategies—savings, investments, cutting expenses—will best help you achieve these goals.

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Putting It All Together

A thorough financial spring cleaning can be transformative for both your short-term budgeting and long-term wealth-building goals. By reviewing your insurance plans, taking stock of your annual expenses, re-evaluating your investments, and planning ahead for the coming year, you’ll enter 2025 with a clear sense of purpose and control over your finances.

Remember, consistency is key. Make it a habit to review your finances every quarter or at least once a year. By staying proactive and organized, you’ll be far better equipped to weather any unexpected financial storms and capitalize on new opportunities.

As you roll up your sleeves and dig into your financial “closet,” keep your bigger picture in mind—your values, life goals, and family responsibilities. This holistic view will help you make informed decisions, reduce money-related stress, and set yourself up for a prosperous year. Here’s to starting your year on the right financial footing!