The year 2025 might shake things up economically, affecting millions of people in various ways. We’ve seen some nice stock market gains that are boosting retirement accounts, but on the flip side, severe storm damage is racking up hefty repair bills and leaving many homes nearly impossible to insure.
Plus, with the new Trump administration coming in, there’s talk of more tax cuts and possibly rolling back some recent protections for consumers in finance. With so much uncertainty ahead, it’s important to focus on what you can control—those aspects that will remain valuable no matter what happens globally.
Kevin Mahoney, founder of Illumint, a financial planning firm based in Washington, D.C., suggests that this is the best way to empower yourself. Here are a few tips to help you get your finances in top shape for whatever the next year throws your way!
Look for ways to score better returns now that interest rates are dropping.
Interest rates are on the decline, and this trend is likely to impact a lot of people in the coming months—especially those with savings accounts, mortgages, credit cards, or car loans. For many borrowers, this could mean some relief from the steep costs associated with their debts.
However, for savers, it might translate to lower returns on their money. Right now, high-yield savings accounts are hovering around 4.5%, which is still better than the 2.7% inflation rate we saw in November. But as banks start to reduce the interest they pay to depositors, it’s crucial to ensure that your account remains competitive.
Malik Lee from Felton and Peel Wealth Management in Atlanta points out that this is a key issue he’s been highlighting for his clients regarding money market accounts—those popular accounts that limit how often you can withdraw but usually offer higher interest rates.
You might be thinking you’re earning a solid 4 or 5 percent because that’s what it was when rates were up there, but now you could be down to just 3 percent. Banks typically notify customers about any changes in rates; however, these alerts can sometimes come late or may not even be turned on for some account holders.
A survey by Bankrate found that nearly two-thirds of Americans aren’t getting optimal interest on their savings.
While the Federal Reserve plans to keep cutting rates, they’ve indicated a slower approach than many had anticipated. Plus, with President-elect Donald Trump’s economic policies potentially increasing inflation risks, the future of interest rates remains uncertain.
Lee suggests now might be a great time to look into certificates of deposit (CDs), which allow you to lock in a specific yield for a set period of time.
He recommends considering what you’ll need for daily expenses versus what you can set aside for six months or even up to a year down the line. Keep in mind that money in CDs generally can’t be accessed without penalties until they mature fully; however, you can find interest rates ranging from 4.25% to 4.65%, according to Bankrate data—and these yields can be secured for terms ranging from just a few months all the way up to five years! This way, you won’t have to constantly keep an eye on fluctuating savings account rates.
Strengthen your savings for unexpected situations.
Since the pandemic recovery, the economy has been pretty unpredictable, and it doesn’t seem like that’s going to change anytime soon—especially with Trump rolling out his proposed agenda that includes hefty new tariffs and mass deportations.
These moves could impact prices on everything from baked goods to beer and even housing costs. A solid piece of financial advice that has stood the test of time is to keep some extra cash on hand for those unexpected twists life throws your way, and financial planners are still all about that.
Samuel Deane, who runs Deane Wealth Management, usually tells his clients to save enough to cover three to six months’ worth of living expenses. But if you work in a field known for high turnover or frequent layoffs, he suggests having an even bigger safety net.
Deane and other financial advisors have noticed that more clients are expressing worries about their finances lately—probably because retailers are seeing more budget-conscious shoppers these days.
When emergencies hit, many people often rely on family, friends, or even strangers for help—like what happened after those two major hurricanes last fall.
Even if you manage to avoid a personal crisis this year, Deane recommends thinking ahead in case someone in your life needs a helping hand. That way, you’re not compromising your own goals while still being there for others who might not be as lucky as you are.
Take another look at your retirement plan.
A lot of folks saving for retirement who have their money in stock market-linked accounts have seen their balances grow significantly over the past year.
Even though Wall Street has had a few bumpy days recently, many investors are still feeling hopeful about what the next administration might bring. While we’ll have to wait and see how that plays out, there’s one thing 401(k) holders can count on: starting next year, the maximum contribution limit will rise by $500, reaching $23,500 for annual pretax savings.
Plus, for those aged 60 to 63, the cap on catch-up contributions is also going up, which means they can increase their retirement savings by as much as 14% starting in 2024.
Now, with the expiration of the Republicans’ Tax Cuts and Jobs Act—introduced during Trump’s first term—looming at the end of this year, many people are already adjusting their retirement strategies.
Fidelity Investments even reported a 45% jump in Roth conversions compared to last year as people try to sidestep potentially higher tax bills down the road.
During my election campaign discussions with clients, I was recommending that now is a great time to convert to a Roth IRA while tax rates are still lower because they’re likely to go up when those current rates expire,” said Kristen Euretig, founder and chief planner at Brooklyn Plans in New York.
Switching an existing retirement account into a Roth IRA allows investors to benefit from high-return stocks and make tax-free withdrawals later on—but they do need to pay taxes on those contributions upfront.
Euretig mentioned that there’s less ambiguity about this situation now: “I sense there’s strong political support in Washington for extending those rates,” she said. So it might be wise for investors to chat with financial advisors about long-term strategies tailored just for them.
Lee added that part of this strategy could involve government bonds. These bonds took quite a hit due to recent Fed interest rate hikes aimed at controlling inflation. However, with rates starting to drop now, it might be worth reevaluating these investments—often viewed as safe havens.
“With rate cuts boosting long-term bond yields,” Lee explained, “investors may face higher-duration risks but could also enjoy greater appreciation as rates fall.”