2025 Goal Setting Guide
<div class="user-question">Hi Frich! What should be my financial goals for 2025?</div>
We’re finally in 2025. Is it time to panic at the ceaseless passage of time? Probably. But it’s also a fantastic opportunity to lean into the clean slate of a new year, and set yourself some clear and actionable financial goals to get you where you want to be over the next 12 months.
Not sure where to start? That’s okay - many people struggle with financial goal-setting because it can feel overwhelming or abstract. Let’s use the foundations of good financial management as inspiration to shape and refine your financial goals for 2025.
🎯 I’m going to get my money organized with a budget
Having a budget is something many people overlook, but it’s a powerful tool for financial clarity. By sticking to a budget, you can see exactly where your money is going, stay on top of bills, and avoid spending more than you earn.
Setting up a simple budget
1️⃣ Figure out your income: Start by calculating how much money you’re bringing in and how frequently.
2️⃣ Calculate your regular expenses: Add up all your fixed costs (like rent) and variable costs (like transport) for each pay cycle.
3️⃣ Determine your surplus: Subtract your total expenses from your income to see what’s left over.
4️⃣ Allocate for saving and spending: Decide how to divide your surplus between discretionary spending and savings based on your current lifestyle and savings goals.
For example, if you have $300 left after covering your expenses:
- Slow and steady saving (e.g. for retirement, or for a house deposit): Save $50-$100 and use $200 for discretionary spending.
- Aggressive saving (e.g. for an emergency fund, or for a large purchase): Save $200 and keep $100 for discretionary spending.
Budgeting methods
Finding a budgeting style that suits your financial habits is essential for sticking with it. Here are a few approaches to consider:
1️⃣ 50/30/20 Budget
This method splits your income into percentages:
- 50% for needs
- 30% for wants
- 20% for savings
Perfect for people who are just getting started with budgeting, or people who like rules and find structure helpful in guiding their behavior.
<div class="frich-tip">Frich tip: here's a PocketSmith guide!</div>
2️⃣ Envelope Budgeting
Popular on social media right now, this system involves withdrawing cash weekly and dividing it into envelopes for specific expenses.
Perfect for people who feel more connected to the dollar amount when using cash, and who benefit from getting hands-on and practical with their money.
<div class="frich-tip">Frich tip: here's a PocketSmith guide!</div>
3️⃣ Sinking Funds
Sinking funds are savings buckets for specific purposes, like car repairs, medical bills, or annual expenses.
Perfect for people who want to proactively plan for non-monthly or irregular expenses and avoid financial stress.
<div class="frich-tip">Frich tip: here's a PocketSmith guide! Make sure to keep your funds in a HYSA; some Frich approved options are here.</div>
Tools
Online tools and apps make budgeting simpler and more accessible, helping you track and manage your money effortlessly.
1️⃣ Frich - Duh! You can keep accountable to your budget by hearing what other people are doing with their money.
2️⃣ PocketSmith - Use PocketSmith to connect your accounts and track your spending all in one place.
3️⃣ Tiller - Fancy yourself more of a spreadsheet person? Tiller is the app for you.
4️⃣ Todoist - When you’ve got some admin to do to keep your budget in check, create a Todoist to-do list so you don’t forget.
🎯 I’m going to actively manage my debt
Debt doesn’t have to be a bad thing! The key is managing it wisely - because an outstanding bill is only a good thing if you’re a duck *ba dum tss*. With the right strategies, debt can be a helpful tool rather than a burden.
Debt has pros and cons
Debt is often divided into two categories:
- Good debt helps improve your financial position, such as mortgages or student loans, where borrowed funds are used to gain assets or skills that add value.
- Bad debt includes things like credit card or personal loans often used for everyday expenses or luxury items, which don’t typically offer long-term benefits.
How to manage debt
1️⃣ Create a debt management plan: Debt management plans (DMPs) help simplify repayment by letting you work with a third party to set achievable amounts based on your income. This can make tackling debt feel less overwhelming.
PocketSmith has some great guides on building ways to manage your debt:
<div class="frich-tip">See if you qualify for loan forgiveness here.</div>
2️⃣ Consolidate your debt: Rolling all your debts into one repayment simplifies the process and can sometimes secure a lower interest rate or better repayment terms, reducing overall stress.
3️⃣ Apply for hardship assistance: If you’re struggling, you can request a repayment holiday or an extension to your loan term, giving you temporary relief and more time to meet your obligations.
If you’re unsure about how to start that conversation, try the following:
4️⃣ Know your rights: Dealing with creditors and debt collectors can be challenging. Understanding your rights ensures you’re treated fairly and can handle these situations with confidence.
🎯 I’m going to set up an emergency fund
Bad stuff happens - life do be like that! But you don’t want to be caught out when it does happen. An emergency fund is your financial (and mental) safeguard for when you need to pay for something unexpected.
The importance of an emergency fund
An emergency fund is a reserve of money kept in an easily accessible cash account, designed to help you navigate financial hardships. Setting aside funds for unexpected expenses isn’t just a smart financial decision - it’s a key component of maintaining financial stability and peace of mind.
<div class="frich-tip">Here are some HYSA opetions that the Frich team loves!</div>
Building your emergency fund
1️⃣ Set a savings goal: Start with an achievable target like $1,000 or $2,000, and adjust it over time as your financial needs grow. Ultimately, aim for three to six months of income to provide a robust safety net.
2️⃣ Choose a timeline: Set a clear target date to stay on track. Break it down by calculating how much you’ll need to save from each paycheck to hit your goal within different timeframes, and pick the pace that works for you.
3️⃣ Stick to your plan: Consistency is key. Commit to setting aside your chosen amount each month and stay focused on your progress until you reach your goal.
Some ideas for speeding up your progress or growing your fund
1️⃣ Sell your preloved items
2️⃣ Increase your salary
3️⃣ Start a side hustle
4️⃣ Deliver food in your local area
5️⃣ Drive for ride-sharing services
6️⃣ Cash in on cashback or reward apps for everyday purchases
7️⃣ Cancel unused memberships or subscriptions
🎯 I’m going to start investing
Investing isn’t just for stuffy dudes in suits anymore - thank god! It’s easier than ever for the everyday consumer, and it can be a vital part of your arsenal in building your wealth for the future.
What can I invest in?
1️⃣ ETFs: Exchange-traded funds are bundles of shares from various companies that track the performance of an index, like the S&P 500.
2️⃣ Managed funds: Similar to ETFs, managed funds also pool investments, but they’re actively managed by a fund manager rather than tracking an index.
3️⃣ Single companies: These are individual businesses, such as Apple or Amazon, in which you can buy shares directly. Unlike ETFs or managed funds, your returns depend solely on the performance of that one company.
How does investing make money?
1️⃣ Capital growth: When an asset’s value increases over time, you can sell it for a profit, known as a capital gain.
2️⃣ Dividend payments: Some companies distribute part of their profits to shareholders as dividends, allowing you to earn without selling your investment.
Understanding your risk tolerance
Investments come with risks, as their value can rise and fall, and even drop to zero, unlike bank deposits. Your investment choices should reflect your risk tolerance:
- A high-risk tolerance means you’re comfortable with the possibility of larger losses in exchange for higher potential returns.
- A low-risk tolerance prioritizes steadier, conservative growth with smaller risks.
Where do I invest?
1️⃣ Investment apps
2️⃣ Traditional brokerages with online platforms
3️⃣ Cryptocurrency platforms
4️⃣ Specialized platforms
Btw - here's how others are doing👀
What are you financial goals for 2025?
🙌24% Improve my money habits
✅27% Save up for a big purchase
💼30% Earn more money
📈19% Learn how to invest
So now you’ve got some ideas to get your goals on a roll. Ultimately, there’s no such thing as a good goal - it really comes down to your own specific circumstances and what you want to achieve. You do you! But if you aim to strengthen the fundamentals of your money management, there’s no reason why you should fail. Have a FABULOUS 2025 💜
Chloe from PocketSmith
