Merry Money Mastery: The 2025 Financial Reset (Part 2)

It’s the holiday season, a time to be merry with family and friends! You can carry that joyful feeling all year long by mastering wealth building for yourself and your family.

Our previous article explored how to lay the foundations for wealth creation by addressing key barriers. We emphasized the importance of mastering money management through a SMART plan – setting clear goals, creating a budget, building an emergency fund and effectively managing debt. Now that you’re exiting 2024 on a better note, how will you manage your money in 2025 as you set out on your mission to achieve your goals?

There is a well-known saying: “If you fail to plan, you plan to fail.” This statement is equally true when it comes to your financial goals. Although financial planning can seem daunting, it is a crucial step towards achieving financial stability and wealth creation. To help you start the New Year strong, here are four essential plans to make.

Know Your Risk Tolerance – Start Your Plan of investments

Investment planning is the process of identifying your goals. financial goals and creating a strategy to achieve them by allocating your money. across different asset classes such as stocks, bonds and real estate. It involves setting clear short- and long-term goals, with target dates to achieve them then. Then you assess your risk tolerance, time horizon and financial situation. This allows you to develop a plan that ensures your money is working efficiently to meet your financial goals. The best time to start investment planning is as early as possible, ideally as soon as you start earning an income. Starting early allows you to take full advantage of compound interest. Even small, consistent contributions can add up significantly if you start early.

A significant benefit of investment planning is that it helps you build a road map to financial security and generational wealth. By diversifying your portfolio and aligning your investments with your life goals, you minimize risk and increase the likelihood of achieving financial independence. But let’s face it, getting started can be overwhelming for many, especially if you’re new to investing. If you don’t know where to start, consult a wealth advisor to help you.

Time Waits on No Man – Start your retirement plan

Retirement planning often takes a back seat in the early stages of working life, but it is an essential component of creating lifelong financial security. Your retirement years—potentially 20 years or more—come with ongoing financial obligations, even though you may no longer have a paycheck. Will you be prepared or will you depend on family for support? Alarmingly, less than 20 percent of Jamaican workers are enrolled in a formal pension scheme, a gap that perpetuates generational poverty as families are forced to support aging relatives instead of building their own wealth.

Whether employed or self-employed, prioritizing a retirement plan is essential. Experts recommend age 40 or more to adequately prepare for retirement. It’s not just about the savings though. Instead, create a formal retirement plan so you can set up a steady stream of income in your golden years. Your plan should include both a formal retirement plan and additional sources of income; for example rental income from real estate or income from your portfolio. of investments. A formal retirement plan is tax-deductible. It allows you to contribute a portion of your pre-tax income, and the money in the plan grows tax-deferred until you withdraw it in retirement.

You don’t just wish – outline your wishes in your estate plan

Estate planning is a key element of a comprehensive financial strategy, but many people delay creating one or assume it’s only for the wealthy. This misconception could not be further from the truth. If you own assets—whether a home, investment accounts, life insurance, a car, a business, or personal inheritances—it’s essential to create a legal document that outlines your wishes. An estate plan specifies how your assets will be distributed upon your passage. or managed if you become incapacitated. It also appoints an executor to ensure that your instructions are followed. While every estate plan begins with a will, more complex inheritances may require additional legal instruments.

A significant benefit of estate planning is that it provides peace of mind. Knowing that your loved ones will be cared for and your wishes respected provides a sense of control and security. By planning now, you reduce potential disputes and ensure that your assets are distributed efficiently. As you look to reset your financial goals for 2025, don’t overlook this essential step. An estate plan ensures that your inheritance it is delivered seamlessly to those you care about most.

Protect your future – get the right insurance

Insurance is a cornerstone of financial planning, but is still underutilized in Jamaica, where 80 percent of the population lacks health coverage. Relying exclusively on public hospitals can leave you vulnerable, especially during a health crisis. Since the basis of health insurance is to provide you and/or your family with a safety net against unexpected challenges, it is important to get the right insurance with the right coverage. For example, critical illness insurance provides essential financial support, helping to cover treatment or other expenses in the event of a serious illness such as cancer or heart disease.

Life insurance, on the other hand, protects your loved ones by covering final expenses, providing a financial cushion and even helping with estate taxes after your death. A whole life insurance policy can be used to generate wealth if your policy has a significant cash value. Alternatively, you can buy term life insurance, which is cheaper than whole life insurance, and invest the difference. Term life allows you to provide protection for your family for a specific period, say 20 years, and can be useful if, for example, you have minor children. Funds saved from not buying whole life insurance can be invested in various assets that can grow and help you build wealth.

Conclusion

Now is the perfect time to master the necessary skills and create a financial plan to build lasting wealth and feel the year-round joy that comes with financial stability. What’s more, National Commercial Bank Jamaica and its subsidiaries offer a comprehensive one-stop experience for people who want to take control of their finances – from expert advisors to dynamic financial solutions for every aspect of your financial plan. Planning your future finance can be overwhelming, especially for those who are new to it, so check with your advisor. of BCN wealth, who can help you develop a customized plan that aligns with your needs and goals. unique.

Kimberley Martin – Assistant Vice President, Corporate Solutions, NCB Capital Markets Limited