How Should You Be Budgeting in 2025? | Global News Avenue

As consumers enter the new year and decide what they want to do with their money, certified financial planners say it’s important to consider possible changes in the economy when setting goals.

The Fed is expected to continue cutting interest rates in the new year, but at a slower pace. There’s also a new administration taking office in January, and their fiscal policies could impact the economy and Americans’ personal finances.

Investopedia spoke with certified financial planners about what the new year may bring to consumers’ finances and how they should prepare for 2025. These quotes have been edited for brevity and clarity.

How should consumers prepare their New Year’s budget?

“While inflation is moderating in 2024, it is still prudent to budget for possible increases in essential expenses such as groceries, utilities and health care. Track your spending in these categories and consider including a 3% increase in your 2025 budget –5% buffer to cover any unexpected cost increases.”

-Nicky Amore, Certified Financial Planner, Chicago

“Use the last few weeks of the year to get your financial footing right. Carefully review your contributions to tax-advantaged accounts (such as a 401(k), HSA, or IRA) to confirm that you are meeting any financial goals and plan ahead for new ones. potential tax changes or opportunities throughout the year. Small adjustments now can lead to big savings later.”

-Akeiva Ellis, Boston Certified Financial Planner

“It’s so important to have a plan, especially a money plan, before the New Year actually rolls around because then you’ve laid the foundation. So once the calendar is up, I’m ready to start these new habits… Log into your credit card statement. Most credit cards will now give you a summary of, ‘Hey, here’s how much you spent this year. Here’s your biggest category.

Schedule a check-in. Habits take time to form. Be kind to yourself, but work on actually forming them. Many resolutions are abandoned within the first month and a half; don’t allow yourself to (do this). Set yourself up for success. ”

-Sarah Paulson, Wisconsin Certified Financial Planner

What impact will the Fed’s interest rate cuts have on personal finances?

“The Federal Reserve is signaling interest rate cuts, which could lower borrowing costs for mortgages, auto loans and business financing. However, rate cuts could also lower interest on savings accounts and fixed-income investments. If you plan to refinance debt or make a major purchase, 2025 Might be a good time.”

-Chad Olivier, Louisiana Certified Financial Planner

“I know a lot of people think that as the Fed cuts rates, we’re going to see mortgage rates go down. They’re not so closely linked that you’re going to see a complete correlation between rate cuts and mortgage rates. So. “If that’s what you’re waiting for before you buy a home and you’re ready to pull the trigger and you’re just waiting for the Fed to cut interest rates, I wouldn’t recommend that scenario.”

——Paulson

“While it’s true that rate cuts have begun, that doesn’t mean we’ll see an immediate relief in borrowing costs or day-to-day expenses. Debt refinancing or major financial moves tied to lower rates may not come to fruition until later in the year. For now, The focus is on keeping budgets tight and building buffers for unexpected expenses. Inflation is cooling, but essential goods prices remain high, so a solid spending plan remains critical.”

-Ellis

How will the new government affect people’s finances? How should they prepare?

“With a new administration, we think the tax cuts probably won’t go away next year… but putting tariffs on imported goods could hinder some of the growth we hope to achieve. If that does happen, then we could be in a recession.”

——Olivier

“The incoming administration and economic optimism have spurred an increase in job opportunities. If you’ve been considering a job jump, now might be a good time to freshen up your resume and explore higher-paying or more fulfilling opportunities. That said, don’t overlook Your emergency fund. Saving three to six months of expenses can provide priceless peace of mind, even in a strong job market.

-Ellis

“If (the new government) acts as massively and dramatically as they said on the campaign trail, we’re going to see a huge price shock on everything we buy. Anything coming from China could easily double in price , but it’s really hard. My hope and guess is that we won’t see something as dramatic as that, but other countries that we import will still be watching and watching and they may preemptively raise some prices to make sure they do. We’re ready to go and won’t take any of the profits out of selling our products to American consumers.”

——Paulson

What should savers pay attention to in 2025?

“Unfortunately, increases in interest rates on CDs, money market and savings accounts are likely to be the first decreases you see. These types of investments already earn pretty good interest rates, and I would argue that these investments are likely to be affected first ( affected by the Fed’s interest rate cuts).”

——Olivier

“In a time of economic uncertainty, it’s critical to re-evaluate your emergency fund. Aim to save three to six months of living expenses. For other savings, it’s worth exploring alternatives like CDs or Treasury bonds to keep up in a lower interest rate environment “Return.”

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