Beautifully Frugal: 6 Steps to Take Control of Your Money in 2025
As the year comes to a close it's the perfect time to pause and evaluate your financial situation. Conducting a personal financial review helps you measure your progress, identify areas for improvement, and set yourself up for success in the upcoming year. Whether you're focused on saving for a specific goal, eliminating debt, or preparing for retirement, reviewing your finances ensures you're aligned with your financial aspirations. Consider these six actionable steps starting in 2025 to set yourself on the path to a prosperous future:
Step 1: Evaluate Your Income and Expenses
Track Your Income: Review your monthly income over the past year. Has your income increased or decreased? Is your salary on track with your career goals?
Categorize Your Spending: Analyze your spending habits by categorizing expenses such as housing, groceries, entertainment, utilities, etc. Many apps like Mint, YNAB, and even bank tools offer spending trackers that can help simplify the process.
Tip: If you feel you’re overspending in certain categories, it may be time to set more realistic budgets and make adjustments.
Step 2: Review Your Savings and Emergency Fund
How Much Have You Saved? Reflect on your savings goals. Did you manage to save for an emergency fund, vacations, or retirement? If not, identify why and make adjustments moving forward.
Emergency Fund: Experts recommend saving three to six months’ worth of living expenses in an emergency fund. How does your savings stack up? While not everyone may be able to achieve this immediately, 2025 is an excellent time to set realistic goals that align with your financial needs.
Actionable Tip: If your emergency fund is lacking, make building it up a top priority. Even small, regular contributions can add up over time.
Step 3: Examine Your Debt
Review Your Debts: List all your debts, including credit cards, student loans, personal loans, or other forms of debt you have. Take note of interest rates and monthly payments.
Paying Down Debt: If you have high-interest debt, prioritize paying it off using strategies such as the avalanche or snowball method.
Debt Snowball Method: This method involves paying off debts in order from smallest to largest, providing quick psychological wins and motivation as smaller debts are rapidly eliminated.
The Avalanche Method: This method prioritizes paying off debts with the highest interest rates first, saving more money in interest over time and potentially shortening the overall repayment period.
Personally, I found the debt snowball method highly effective when paying off our family’s debt. You can learn more about this journey in my "Overcoming Debt & Building Wealth" Webinar; find the link here.
Credit Score Check: While checking your credit score may not be fun, it's essential. Monitoring it can help you spot any potential identity theft issues and ensure your credit stays on track.
Tip: If you haven’t yet, consider refinancing or consolidating high-interest debts for more manageable payments.
Step 4: Assess Your Investments
Review Your Investment Portfolio: Whether you have stocks, bonds, or retirement accounts like 401(k)s or IRAs, assess their performance over the year. Are you meeting your investment goals?
Diversification: Is your portfolio diversified, or are you too heavily invested in one asset class? A well-balanced portfolio reduces risk!
Retirement Goals: Review your retirement savings. Are you on track to retire when you want? The general recommendation is to save 15% of your income toward retirement.
Actionable Tip: Consider speaking to a financial advisor to ensure your investments align with your long-term goals. They’re there to help you navigate these decisions!
Step 5: Set New Financial Goals for the New Year!
Reflect on Past Goals: Did you achieve your financial goals this year? If not, what were the roadblocks? What can you do differently in the new year?
Set SMART Goals: When setting new goals, ensure they are Specific, Measurable, Achievable, Relevant, and Time-bound. Whether it’s saving for a home, increasing your credit score, or paying off debt, make sure the goals are clear and trackable.
Actionable Tip!: Break down your large goals into smaller, more manageable steps so you can track your progress.
Step 6: Automate and Simplify Your Finances
Use Automation: Automate your savings, bill payments, and investments. This will reduce the risk of missing payment deadlines or saving inconsistently. Work smarter, not harder! Consider having automatic transfers set up for your savings accounts or retirement funds, ensuring you never miss a beat.
Simplify Your Financial Systems: Are you juggling multiple bank accounts, credit cards, or loans? Consolidating accounts or using a single financial tool can make your life simpler and easier to manage.
By reviewing your finances, you gain valuable insight into your spending, saving, and investing habits. This is the first step in making better financial decisions for the future. The key to financial success isn’t making huge changes overnight, it’s being consistent over time. Small steps can lead to big results. Follow my blog for more personal finance tips, budget-friendly advice, and goal-setting strategies!
Alexandria Miller, CPFA® Financial Wellness Advocate