The early part of a new year is the best time to make sure that you have everything you need to set yourself up for success for the remainder of the year. Yes, handling your finances can be very confusing, particularly with inflation and other variables forthcoming this year, so my suggestion is to start small with a simple three-item checklist: protect yourself from financial exploitation, reevaluate your investment strategy and conduct a financial housecleaning.
1. Protect yourself from financial exploitation
Regardless of your age or financial standing, you can be susceptible to attempts to steal your assets. These attempts have become more frequent, particularly with the rise of artificial intelligence (AI) and other technological advancements that have made scams more sophisticated and harder to detect — not to mention more likely to succeed. According to the FBI’s 2023 IC3 Elder Fraud Report, the type of complaint that saw the largest increase in the number of claims, as well as dollars lost, was scams related to cryptocurrency, which was also the case in 2022.
The best defense against such threats is awareness. Being able to quickly identify when financial exploitation is occurring and stop it before too much damage has been done is key. Even if you don’t have any immediate concerns, you should talk to your financial adviser about potential threats. Increased communication around financial exploitation can help you learn how to detect and avoid these scams.
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You may be reluctant to talk about a subject like financial exploitation because of its negative connotations. But only by having these difficult and necessary discussions can we help create a more protected financial environment for all.
2. Develop an investment strategy built to withstand 2025’s curveballs
Almost half of all Americans don’t have any assets invested in equities or fixed income, citing a lack of understanding of how to invest, according to one of our recent surveys. Clearly, there is a need for more financial advice and education on this front. If you are just starting your investing journey, having a well-diversified investment portfolio early on can help set the stage for long-term success.
Additionally, when developing your investment and savings strategy, consider factors like inflation, which is a genuine concern in today’s economy that can threaten to derail investors’ progress toward their goals.
Furthermore, in uncertain markets, it’s important for long-term investors to maintain perspective and avoid the market-timing trap. Trying to predict market movements is often seen as a risky strategy because the bulk of long-term profits have traditionally come from a limited number of trading sessions. If you’re not invested during these specific periods, your overall earnings could be significantly diminished and could potentially even lead to financial losses.
3. If you think your finances are in order, check again
Regular “financial housecleaning” is crucial, and the early months of a new year is a perfect time to do this. It’s important to review and adjust your budgets at least once a year, or anytime there’s a significant change in your income or financial circumstances. If you’re looking to curtail expenses, start by eliminating unnecessary subscriptions or other monthly expenses. Then, assess your major expenditures and consider if any adjustments are needed. Consider the possibility of dividing your budget into needs, wants and wishes and temporarily delaying some purchases to give yourself more time to save up for them.
If you find you have some income left over after setting budgets for your expenses, consider the possibility of investing some of that extra cash. By putting extra cash into investments rather than into a savings account, you may be able to passively grow your assets to set yourself up for success in 2025 and beyond.
By safeguarding against financial exploitation, refining your investment strategy (or getting started with one), bracing for inflation and keeping a balanced budget, you are paving the path toward financial success in 2025. Remember, financial success is rooted in well-informed, forward-thinking decisions. Be sure to take the time to check in on your finances at least once a year so you will have one less thing to worry about later on.
Everyone’s specific situation is unique, so I always recommend speaking to a financial adviser so you can receive guidance that is tailored to your financial goals and situation. A good place to start is Janus Henderson’s Direct Advice program, which is designed to provide investors with greater access to financial advice and investment solutions.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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