January 2 2025

New Year, time to reflect: how 2025 showed us the importance of Financial Planning

Happy new year! As we step into 2026, many people are setting new goals for the year ahead. The start of the year is an excellent moment to review your financial situation and reflect on the lessons of the past year. If your goal is financial peace of mind, it starts with a financial plan that is tailored to your life, goals, and long-term objectives.

The 2025 reality check: euro vs dollar

In 2025, U.S. stock markets performed well overall. Despite this strong performance, European-based investors benefited less from U.S. investments than U.S.-based investors. This difference was largely driven by euro/dollar currency movements.

Vanguard S&P 500 ETF

Figure 1 S&P 500 Vanguard ETF (tickers: VOO & VUSA) – euro vs dollar (source: Google Finance)

The graph illustrates  the U.S. and European versions of the Vanguard S&P 500 ETF.
Although both track the same index, their returns are not the same due to the currency fluctuation.

Chart with dollar against euro

Figure 2 Euro / Dollar exchange rate (source: Google Finance)

During 2025, the euro/dollar exchange rate moved from approximately €1.03 to around €1.17. In other words, the U.S. dollar depreciated by roughly 14% over the course of 2025. This shift directly affected American expats in Europe, reducing their purchasing power for expenses or long-term goals denominated in euros.

What can we learn from this

For American expats living in Europe, the euro/dollar exchange rate can have a significant influence on personal finances. This becomes especially clear when your income is in dollars but your cost of living is in euros.

The cost of living in the “wrong” currency

The expat's currency challenge

Figure 3 Asset – liability mismatch (made by Gemini)

If you intend to stay in Europe for the long term, localized financial planning becomes essential. Whether you are saving for a home in Europe, planning for your children’s education, or preparing for retirement, your future liabilities are largely in euros. If your assets remain exclusively in dollars, you are exposed to constant volatility. If the dollar takes a significant dip, your “permanent” life in Europe suddenly becomes much more expensive.

2026: Financial Peace of Mind

The start of the new year is the perfect time to reflect on your finances and realign them with your goals. Achieving financial peace of mind in 2026 means having a tailored financial plan, and it’s important to keep the currency effect in mind.

  • Asset-liability matching: aligning a portion of your investments with the currency you actually spend.
  • Strategic diversification: looking beyond the U.S. financial markets to ensure your portfolio isn’t overly dependent on single economy or currency.

By taking these steps, you reduce the risk that exchange rate fluctuations dictate your financial security or quality of life.

How Noesis Capital Management can help

At Noesis Capital Management, we specialize in working with international clients. We help you design a tailored investment strategy that aligns with your personal goals and financial situation.