Newsletter For January 5, 2025: What’s In Store For 2025

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Dear Financial Samurais,

Happy New Year! I hope you had a joyful and reflective time off. I’m back in San Francisco, recharged but not quite ready to dive into the hustle just yet. My time away gave me space to slow down and reassess what I truly want out of life.

Last year’s theme was “One last year of intense focus.” That focus helped me claw my way out of a liquidity crunch. This year’s theme is “Back to a simple retirement lifestyle!” Already, I feel much more relaxed, as I’ve eased up on the self-imposed pressure that’s driven me for years.

If you’re curious, check out my 2025 Goals And Resolutions. I’d love to hear some of yours too—don’t be shy! I’ve also published my 2024 Year In Review for a look back.

Mental Preparation for the Stock Market in 2025

One of my biggest takeaways from 2024 was feeling incredibly fortunate. With another strong year in the stock market and steady gains in real estate, many of us have outperformed historical expectations. Let’s take a moment to appreciate that.

However, it’s wise to prepare for a potential reversion to the mean. If the S&P 500 returns to its historical forward P/E multiple of 17x, the market could drop about 15% to 5,000. While the likelihood of this happening in 2025 may only be around 30%, it’s worth keeping in mind.

Analysts are projecting 15% earnings growth for the S&P 500 this year, up from 8% in 2024. That’s a high bar, making it easier for highly valued companies to stumble.

151 years of S&P 500 returns - Where will 2025 end up? Hard to know. Financial Samurai newsletter for January 5, 2025

If you’re early in your financial independence journey or have kids, a market correction could actually be a blessing. As a parent, I constantly think about how expensive everything will be 20 years from now, from stocks to real estate. Take advantage of corrections.

See: Open Up A Roth IRA If You Love Your Kids

An Unexpected Concern After Upgrading Homes

Sometimes you don’t realize the full impact of a decision until you live through it. Fifteen months after upgrading to a larger home, I’ve started worrying about creating a warped sense of reality for my children.

I’ve always said the best time to own the nicest home you can afford is when you have kids. But upgrading too drastically—say, from a modest two-bedroom to an eight-bedroom mega mansion—can have unintended consequences.

This realization hit me after visiting my parents in their old and unrenovated home and riding around the island in my dad’s rattly 1997 Toyota. Returning to my much nicer home and car made me acutely aware of the contrast.

As financially focused parents, we face a dilemma: how to enjoy the life we’ve earned without spoiling our children. Thankfully, I found a fun and effective solution, which I share in my post, Feeling Poor As A Child May Help Them Grow Rich In Many Ways.

Exciting Plans for Financial Samurai in 2025

My goal this year is to keep the newsletter and blog posts educational, actionable, and entertaining. I’ll tackle current events that impact personal finances and share practical solutions to dilemmas we all face.

I also plan to experiment with shorter, punchier posts to match our busy lives and boost my own writing endurance. The aim is to publish a couple of posts a week along with this weekly newsletter.

Thank you for your incredible support in 2024. Here’s to a rewarding and adventurous 2025!

To Your Financial Freedom,

Sam

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