Is Your 2025 Financial Plan Built to Succeed or Set Up for Failure?

As we approach the start of 2025, many of us are taking a hard look at our financial goals.

We know that setting goals is important, but just as important is having the right strategies in place to make those goals a reality.

Financial planning isn’t about hoping things work out—it's about implementing sound, tested strategies that protect your wealth, help you grow it efficiently, and ensure you're ready for whatever life throws at you.

If you’re like many people, you may be hoping to achieve big things in 2025: increasing your savings, diversifying your investments, minimizing your taxes, securing your retirement, or even planning for the rising costs of education.

But even with the best of intentions, without the right strategies in place, achieving your financial goals can feel like an uphill battle.

Here’s where my expertise in college planning, retirement strategies, and tax diversification can help you.

Over the years, I’ve learned that the most successful financial plans aren’t built on wishful thinking—they’re built on clear, actionable strategies that protect, grow, and optimize your wealth for the future.

In this newsletter, I’ll outline three of the most important strategies that can help you build a solid financial foundation for 2025 and beyond.

These are strategies that you can implement right away to set yourself up for success in the year ahead.

1. Protect First, Invest the Rest: The Importance of Financial Protection

Too often, people dive straight into investment opportunities without first ensuring that they’re financially protected.

Think of it this way: if your financial house is built on a weak foundation, no amount of investment growth will truly secure your future.

This is why I always advise my clients to protect first and invest the rest.

This philosophy is especially important as we enter 2025, when uncertainties such as economic shifts, inflation, or unforeseen personal challenges could impact your financial wellbeing.

What does protecting your wealth look like?

1. Life Insurance: Having a well-structured life insurance policy, particularly one with cash value like Indexed Universal Life (IUL), can help protect your family’s future if the unexpected happens. These policies also provide a way to accumulate wealth in a tax-advantaged manner.
2. Emergency Fund: One of the most basic yet crucial elements of financial protection is an emergency fund. This fund serves as a financial cushion during tough times, whether it's job loss, health issues, or major repairs. Having three to six months of living expenses saved in a liquid account should be a priority for anyone, especially in uncertain economic times.
3. Disability Insurance: If you rely on your income to meet your financial goals, having a disability insurance policy in place can ensure that you're covered if an illness or injury prevents you from working. This coverage is often overlooked but is a crucial element of your financial protection.
4. Asset Protection: For business owners or high-net-worth individuals, asset protection strategies—like establishing trusts or using insurance to protect key assets—are essential. These can safeguard your wealth from lawsuits, creditors, or other threats.

Why is protection the foundation of a solid financial plan?

Simply put, it ensures that when life doesn’t go according to plan, you aren’t left scrambling to recover.

With protection in place, you can move forward with confidence, knowing that your financial house won’t crumble in the face of challenges.

2. Tax Diversification: Minimizing Taxes for Future Flexibility

When it comes to financial planning, tax efficiency is one of the most important aspects often overlooked.

Many people focus solely on accumulating wealth, but the truth is that how you structure and withdraw that wealth can have a huge impact on your financial future.

In the same way that you diversify your investments, it’s crucial to diversify your taxes.

Having a tax diversification strategy will give you more control over your future tax liabilities and help you create a more flexible financial plan.

What does tax diversification look like?

1. Taxable Accounts (Tax Now): These are the accounts where you pay taxes annually on interest, dividends, or capital gains. While taxable accounts don’t have the tax advantages of retirement accounts, they offer the benefit of liquidity and flexibility when it comes to accessing funds. Think of them as the "tax now" accounts. The goal here is to invest in low-turnover assets, like individual stocks, that don’t generate significant taxable events each year.
2. Tax-Advantaged Accounts (Tax Never): The ultimate goal in a tax-diversified strategy is to build up "tax never" accounts. These include cash-value life insurance, Roth IRAs, Roth 401(k)s, and other investments that allow for tax-free growth and tax-free withdrawals in retirement. The beauty of these accounts is that they allow you to "lock in" your tax rate today and protect your wealth from future tax increases.
3. Tax-Deferred Accounts (Tax Later): Examples include annuities, traditional IRAs, 401(k)s, and other employer-sponsored retirement plans. Contributions to these accounts are made pre-tax, which reduces your taxable income for the current year. However, when you withdraw the funds in retirement, they are taxed as ordinary income. While these accounts help defer taxes today, the key is that you will eventually pay them in the future, at a rate that may be higher if tax laws change or your income increases.

By combining taxable, tax-deferred, and tax-advantaged accounts, you create a multi-pronged strategy that gives you greater flexibility and control over your taxes in retirement.

Why is tax diversification so important?

The more diversified your accounts are, the more options you have when it’s time to withdraw funds.

This means you can control your taxable income, minimize taxes, and avoid potential penalties for withdrawing from accounts too early.

Tax diversification also helps you prepare for uncertain tax policies in the future, ensuring that you're not caught off guard by higher tax rates or unexpected tax changes.

In 2025, make it a priority to assess your current tax strategy and ensure you are taking full advantage of tax diversification.

It will give you peace of mind knowing you have multiple options to reduce your tax burden in retirement.

3. Plan for College, Even If You’re Not Paying for It

Education costs continue to rise, and even if you don’t have children or aren’t directly funding a college education, planning for the financial impact of higher education should still be part of your financial strategy.

Why?

Because the assets you have today may impact your ability to qualify for financial aid, even if you're not the one directly paying for school.

This is where strategic planning can help offset future costs and minimize the financial burden.

How can you plan for college expenses effectively?

1. Use Tax-Deferred and Tax-Advantaged Accounts to Minimize FAFSA Impact: By utilizing tax-deferred and tax-advantaged accounts, you can reduce the assets reported on the FAFSA (Free Application for Federal Student Aid). This can help lower your child’s Expected Family Contribution (EFC) and potentially increase the amount of financial aid they are eligible for. For instance, funds in cash value life insurance, annuities, 401(k) or traditional IRA are not counted as assets on the FAFSA.
2. Set Up a Life Plan: Set your kids up with a Life Plan which will enable them to get a head start in adult life, regardless of what they choose to do. The most common college savings plans are 529 plans which allow for tax-advantaged savings so long as the money is used for educational expenses. That is also its downside: both the seed and the harvest will pay taxes and penalties if used for anything other than college (i.e., non-qualified) expenses. So if your child decides to delay college or go down a different path there will be taxes and penalties assessed. Learn about different strategies to set your children up with a Life Plan that will serve them well on whatever path they choose.
3. Maximize Available Tax Credits: Certain tax credits, such as the American Opportunity Credit and the Lifetime Learning Credit, can help reduce your out-of-pocket education expenses. Understanding these credits and how they work with your overall financial strategy can help save you money as you prepare for college costs, whether it's for your children or your own education.
4. Consider Alternatives to Traditional College: College isn’t the only path to success. Consider vocational programs, certifications, or apprenticeships that can offer significant returns on investment without the high tuition costs. For your children, working with a college planning expert can ensure they take the right steps in high school to maximize financial aid and minimize college expenses.
5. Start Early and Understand How Colleges Allocate Student Aid: Colleges don't just look at the family's situation; they also take into consideration many aspects of the student's academic and social life, so the earlier in his/her high school career you and your student start thinking about these things, the better your student can be positioned to get the best possible aid package when the time comes from his/her desired institution. A qualified college planning expert can help you and your student navigate these hurdles.

Why should you plan for education, even if you’re not directly funding it?

The reality is that education costs are increasing, and the financial aid system is based on a formula that considers your income and assets, as well as your student's academic and social performance in high school.

By planning now, being intentional with your student during high school, and diversifying your financial strategies, you can offset costs and avoid the shock of college expenses that may affect your future financial goals.

Conclusion: Take Action Now for a Successful 2025

As we move into 2025, now is the time to put the right strategies in place.

Protect first, invest the rest, diversify your taxes, and plan for education costs, even if you’re not directly paying for them.

With these three strategies, you will build a solid financial foundation that positions you for success in the year ahead.

The choices you make today will shape your financial future. Take control of your financial journey now—because the future won’t wait.

If you would like to learn more about how I can help you, book your discovery call at:

https://calendly.com/maybar-uw

What was your biggest takeaway from today's newsletter?

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