Total consumer debt reached an all-time high of $17.7 trillion in the second quarter of 2024, while Americans’ pandemic-era excess savings were depleted by March, according to the consulting firm Deloitte. Its report states that the strength of the U.S. consumer will be tested in 2025.
That’s why now is the perfect time to check in on the health of your finances and take proactive measures to start off the new year on solid footing.
9 end-of-year money moves to tackle now
Completing these banking tasks before year-end can help set you up for financial success in 2025.
1. Perform a budget checkup
Creating a budget is crucial, but it shouldn’t be set in stone. Your financial situation and priorities may have changed since the start of 2024.
Compare your monthly spending amounts with the amount you expected to spend. Did you spend more, less, or about the same?
If you spent more than you expected, you may need to come up with a plan to reduce your spending and/or increase your income in 2025. Alternatively, if you spent less than expected, it may be time to bump up your savings and investment contributions.
2. Shore up your emergency fund
Maintaining an emergency fund is one of the most important steps you can take to protect the health of your finances.
Why? Without an adequate emergency fund, you might be forced to turn to credit cards or other forms of high-interest debt if you lose your job, experience a medical emergency, or are surprised with a major unplanned expense.
To prevent this from happening, experts typically recommend having enough liquid funds to cover at least 3 to 6 months’ worth of living expenses. But if you are self-employed or have an unpredictable income, you may need more.
So take a look at your current savings and decide whether you need to work on building a bigger safety net. If so, determine how much you can afford to set aside each month and start contributing to a high-yield savings account that you can easily access when needed.
3. Use up FSA money
A flexible spending account (FSA) is an employee benefit allowing you to set aside money for healthcare expenses. The money in an FSA is contributed pre-tax, and you can use it to cover qualifying expenses such as deductibles, co-payments, coinsurance, and some drugs.
FSA contributions are limited to $3,300 per employer per year. If you are married, your spouse can contribute the same amount through their employer’s plan.
While FSAs can provide tax savings for eligible healthcare expenses, you generally must use the money in the account within the plan year. If you don’t, you may lose the money in the plan (though some employers offer leeway in the form of grace periods or carry-overs).
If you currently have money sitting in your FSA, consider using the remaining funds before the end of the year. Contact your employer for details about which expenses are covered under your plan.
4. Audit your subscriptions and cancel the ones you don’t use
According to C&R Research, the average consumer spends about $219 per month on subscriptions. However, the same consumers estimated they only spent $86 per month. This subscription creep could be costing you over $2,500 per year without even realizing it.
Do yourself a favor and review your bank and credit card statements to spot subscriptions you rarely use (or even forgot you had) and cancel them. To simplify the process, consider using a service like Rocket Money to identify recurring subscription costs.
5. Make health appointments before your deductible resets
Your deductible on an insurance plan is the amount you must pay out of pocket before your insurance provider starts to pay. These deductibles generally reset on Jan. 1.
If you have already reached your deductible for the year, take advantage of reduced health costs and make any outstanding medical appointments by the end of the year. If you wait until next year, you’ll once again need to reach your deductible before insurance kicks in.
6. Max out tax-advantaged accounts
Accounts that offer tax advantages, such as 401(k)s, individual retirement accounts (IRAs), and health savings accounts (HSAs), are powerful ways to save and invest. Contributions to these accounts reduce your taxable income, helping you get a bigger refund — or at least, a lower tax bill — when you file.
You have until April 15, 2025, to contribute the maximum allowable amount for tax year 2024. So if possible, aim to max out your contributions by the deadline, if not sooner. If that’s not financially possible, but your employer offers matching contributions on your 401(k) or similar plan, make sure you are at least contributing enough to get the highest match available.
7. Re-evaluate taxable investment accounts
While often not as critical as tax-advantaged accounts, taxable brokerage accounts have benefits. One of the biggest is the ability to make penalty-free withdrawals at any time. Additionally, you often have more freedom in investment selection than you would with a 401(k).
If you invest using taxable accounts through an online brokerage or elsewhere, there are some basic tasks you should do at least once a year. Perhaps the most important is rebalancing, which involves selling investments above your target allocation and buying ones below your target allocation. You can also perform tax-loss harvesting, selling underperforming investments to offset capital gains.
8. Pay down high-interest debt
High-interest debt can significantly strain your finances, so reducing or eliminating it can help you start off 2025 on better financial footing.
Fortunately, debt reduction is not all or nothing. For example, if you are currently making the minimum payment on your credit card bill, consider paying an extra $50 monthly. This will help reduce your balance faster, significantly reducing how much interest you pay in the long run.
9. Consider refinancing
If you are currently making monthly payments on a large loan, such as a car loan or mortgage, check your current interest rate against today’s rates. The Federal Reserve recently cut the federal funds rate, which means interest rates on loans and credit cards have also been falling. Refinancing could save you a lot of money if rates have dropped since your purchase.
Keep in mind that the exact rates you qualify for will depend on your income, credit score, and other factors. Additionally, there can be origination fees and other costs when refinancing. So crunch the numbers and see how much refinancing could potentially save you before applying.
