The beginning of the year is a great time to take a comprehensive look at your finances in anticipation of the year to come. While there are many unknowns that could impact your financial situation, planning for known factors can better prepare you for unforeseen events. Some of this planning can be done on your own, while other pieces may require input from your financial advisor, tax professional or estate planning attorney.

1. Estimate your expenses. Have there been changes in your lifestyle that could impact your spending habits? Will you have any large, non-recurring expenses? Consider the cost of groceries, gas and other daily expenses. One simple way to budget for those everyday expenses is to calculate what you spent last year and add an inflation factor. The Consumer Price Index measures inflation, and the Bureau of Labor Statistics releases CPI measures for specific geographic areas throughout the US. The CPI for the San Francisco area in December 2024 showed a 2.4% increase from the year prior. Take your daily expenses and increase them by 2.4% to account for the rising costs of goods and services.

Review all outstanding debts and build debt payments into your budget. Create a strategy for paying them down or look for opportunities to consolidate or refinance high-interest debt, like credit cards or student loans. A financial advisor can help you assess your particular liabilities and determine the best payment strategies for you.

2. Review your sources of income. While you’re gathering the documents needed to complete your tax return, take the opportunity to review your income, including salary, investment income, pensions, Social Security and required minimum distributions from retirement accounts. Can you expect any changes to your income this year? Certain sources, such as salary, may be easy to predict. Others, such as investment income, may be more variable. When in doubt, anticipate a lower income stream to keep your expectations conservative.

3. Now, compare your income and expense estimates. Does your income meet or exceed your expenses? If not, review those expenses again. Look for discretionary items you can forego to make your budget work.

Consider whether you need to withdraw funds from your investment portfolio to supplement your income. Will you take a monthly draw or larger lump-sum withdrawals, as needed? Ensure you have enough accessible funds for short-term needs without having to sell your investments at an inopportune time.4. Review your investment portfolios. Are you comfortable with your current asset allocation and risk level? Has anything in your financial situation changed that will impact how much you contribute or withdraw from those accounts this year? Discuss these changes with a financial advisor. They may want to adjust your portfolio to meet your needs and goals.

5. Make a savings plan and stick to it. The IRS has increased the 401(K) contribution limit to $23,500 in 2025, up from $23,000 in 2024. If you’re working, you may want to adjust your retirement contributions.

Look at your savings outside of retirement accounts. If your emergency fund is low, consider making monthly contributions until it reaches a value that makes you feel secure. A basic rule of thumb is to keep 3-6 months of living expenses saved in case of unexpected events.

6. Plan your 2025 tax strategy. Consider making adjustments to your withholdings, contributing to tax-advantaged accounts (like HSAs IRAs, or employer sponsored retirement accounts) and using tax-efficient investment strategies to minimize liability.

Charitable giving can be a significant component of tax planning. Even if you don’t know which charities you’ll be supporting, determine the maximum amount you’d like to give. If you engage in significant charitable giving, certain gifting vehicles and strategies may increase the tax benefit you receive. Your tax preparer and financial planner can help you determine the best method of gifting to meet your philanthropic goals, while maximizing your tax benefit.

7. Review your insurance coverage, including auto, homeowner’s, health and life insurance, to check for any changes in your premiums, deductibles or coverage options. Evaluate whether your life insurance coverage is adequate, especially if your family circumstances have changed. You may need more coverage if you are recently married, have kids, or have a mortgage.

By reviewing these financial items annually, you can stay on top of your financial health and make adjustments to help you achieve your long-term goals.

Hannah Rogge is a senior wealth advisor at Monterey Private Wealth, Inc., an independent wealth management firm in Monterey. She welcomes questions you may have concerning investments, taxes, retirement, or estate planning. Send your questions to: Hannah Rogge, 2340 Garden Road Suite 202, Monterey, CA 93940 or email hannah@montereypw.com.