The end of the year is a special time full of old and new traditions and hopefully a space to relax, unwind and prepare for a glorious New Year.
With the last day of the year fast approaching, it’s important to deliberately take time to prepare your finances for the coming year.
What should be on your year-end to-do list?
Here are nine financial elements you should never forget.
1. Organize your budget (aka spending plan)
Are you worried about your year-end spending? Don’t worry; we’ve all been there. The holiday season is often a good time to increase your household spending, as spending tends to increase.
i will stop soon. First, let’s stop thinking of budgets as “budgets”. It has too many negative connotations (spending anxiety, restrictions, bad shopping moods, fear of small boxes, etc.).
Start thinking about you instead Budget as spending planA spending plan is your guide to spending money in the way that makes the most sense for you. When used correctly, it ties money to goals and values, and can lead you to occasionally spend more on things like travel, hosting, and gifts.
take a good look at Where, what, how When why you are spending money
- where does your money go
- what are you spending your money on?
- How do you spend your money? Are your purchases deliberate or spontaneous? Are you using your credit card responsibly?
- why spend this money?
Knowing the answers to these questions will help you create a sound cash flow plan. It also helps drive not-so-great spending habits (which we all have!) to the curb, like spontaneous buying, retail therapy, and Keeping Up With Jones.
By factoring the extra savings into your spending plan, you can make enough money to cover gifts, cook fancy holiday dinners, and (literally) keep the lights on.
2. Make the most of your retirement plans
Saving for retirement is as commonplace as preparing meals for the week. Automating your investments will help you create consistent, healthy habits and reach your goals.
As the end of the year approaches, it’s a great time to see how much you’ve saved compared to your annual maximum. Let’s see the numbers for 2022.
- you can save Up to $20,500 on a 401(k). The total contribution limit for this account, including employer matching, is $61,000. (Anyone with access to Mega Backdoor Roth has access to this her $61,000 number, so check with your employer to see if this is an option for you). These numbers do not include catch-up donations (additional $6,500 for those over 50).
- contribution limit $6,000 for an IRA (add $1,000 for a catch-up over 50). This limit applies to Traditional and Roth accounts.
Find out how much money you’ve saved so far this year. Are you already running out of accounts? Can you contribute some more to reach that number? Little things go a long way when it comes to investing and compound interest. If you really feel like you need to take baby steps, increase your donation by 1% now or by $100 a month, then set a reminder to do it again in 6 months.
Using up your retirement savings will not only be a huge bonus for the future you, but it will also significantly improve your current financial situation. Contributions to your 401(k) are pre-tax.
If you are covered by a retirement plan at your workplace, you may not be eligible for deductible (pre-tax) contributions to a traditional IRA, but investing in it can provide valuable benefits in retirement. It can be obtained. You may be eligible for a Roth IRA even if your income is: This thresholdThe loss account is funded in after-tax dollars, so putting money in doesn’t give you any tax breaks, but your future self will thank you if you withdraw this money tax-free when you retire.
3. Assess your debt
At Gen Y Planning, we are committed to ensuring that you have a strong financial foundation. Part of that foundation is creating a solid debt repayment plan.
Let’s see where your debt is. Create a spreadsheet of balances, interest rates, monthly payments, and when debt is due.
- What progress have you made this year?
- Did you encounter any obstacles?
- Are there additional resources that can be allocated to pay off the debt?
Remember, the student loan freeze (0% interest and no payments required) is in effect until the end of June 2023. That means you won’t have to start paying off your federal student loans until early next year. There is a possibility that the loan will be exempted up to a certain amount, but nothing has been decided (legally), so we won’t know until the government makes a decision.
Do not worry. We’ll let you know as soon as we know.
In addition to assessing your current debt situation, it’s important to see if you plan to go into debt in the New Year, whether it’s buying a house or taking out debt. home renovationpersonal loans, graduate student loans, etc.
If so, be sure to include that significant purchase/investment as part of your plan for 2023. We would be happy to help you create a plan to support your new goals.
4. Pay attention to taxes
Taxes are always a big issue, especially since the end of the year is one of the last opportunities to make strategic decisions that will affect your 2022 tax return.
One thing is certain, April will come much sooner than you think. First of all, before the end of the year he should contact the CPA. You might be surprised at how quickly and tightly their calendar gets booked.
Once your CPA is all reserved, consider a few other things you can do to positively impact your tax liability. Ask yourself,
- Am I eligible for a new tax credit or deduction?
- Are you running out of pre-tax amounts on your 401(k), HSA, FSA, dependent FSA, etc.?
- Do you need to sell your investment before the end of the year? This will result in long-term capital gains (usually taxed at 15%) or short-term capital gains (taxed at current tax rates).
If tax reform is imminent, tax rates could rise, especially for those earning more than $400,000. Do you (and your spouse) fall into that category? Now might be a good time to take advantage of current tax rates, especially if your income was a particularly low year. That could mean looking at strategies like Roth conversions (converting money from traditional IRAs to Roth IRAs) or realizing some capital gains at current rates.
Remember, tax laws change all the time, depending on the administration. It’s all about staying on top of potential changes and making the most of the situation.
5. Keep saving for school
Did you recently add a bundle of joy to your family? Congratulations! What a beautiful season of new parenthood. While you’re enjoying quality time with your kids over the holidays, don’t forget to save for their future (time flies by, college comes before you know it) .
If saving for your future education is an important goal for you, it’s a good idea to start saving as soon as possible. Rule of thumb: Before you save for your education, make sure you have enough savings for retirement, a healthy emergency fund, and paying off debt.
Once you’ve ticked all these boxes, you can move on to other investment ventures. A great way to save money on college (and your K-12 education) is with a 529 plan. The 529 Plan is a state-sponsored tax incentive to save for education. Contributions are after-tax, but investment income and eligible distributions are tax-free.
529 plans are very flexible. You can also enroll in a plan in a state you don’t reside in, but you may have to forego the resident tax benefits. Depending on your state’s offerings, you may want to consider other options.
Most 529 plans offer a limited fund menu like select mutual funds, but can be expensive considering investment fees.But programs like Utah My529 We offer a great alternative with a wide selection of index funds and low expense ratios.
Set your college savings goals early! again, college savings calculator It helps you make concrete plans.
6. Giving Back with a Charitable Donation
Return is a tradition at the end of the year? Here are some ways you can consider donating to charity this year.
- Donate available funds in cash, checks, assets of value, etc.
- Give your time and talents in volunteer work.
- Donate your professional skills to organizations you care about.
- Invite your family and friends to your fundraising event.
- Find ways to give all year round.
As you can see, charitable giving far exceeds the amount that can be donated. It’s about dedicating your time and resources to a cause that means a lot to you.
Community and individual rewards are the primary reason for participating in philanthropic activities, but there are also tax incentives for donations.
Usually people think of itemizing charitable donations.But what if there aren’t enough to itemize this year? 86% Countries receiving standard deductions.
of 2022 Standard deductions are as follows:
- $12,950 for singles and married couples filing separately
- Head of household $19,400
- $25,900 for couples filing jointly.
You may also be able to itemize mortgage interest, student loan interest, high medical bills, etc.
7. Take advantage of health benefits
Need a last-minute doctor’s appointment? Need to renew your glasses/contacts prescription? Is it finally time to visit the dentist and get fillings? Need a new prescription?
It’s time to put those appointments on your calendar, especially if you have money left over in your Flexible Spending Account (FSA). In 2022, you can donate $2,850. If you have money to spare at the end of the year, most plans offer several options.
- a grace period of several months or
- Option to carry forward some unused funds.
You can only roll over $570, even if you donate the maximum amount to your account next year. Any funds in excess of that number will be lost. Spend as much as you can to maximize your hard-earned savings.
8. Estate plan check-in
It’s really easy to put off real estate plans. With so many other responsibilities and commitments, real estate planning may not be on your mind. However, making proper plans for your children, dependents, and loved ones is an important task.
- Do you have your will (or need to update)?
- Have you chosen a guardian and financial trustee for your child? These people are legally responsible for your child if something happens to you. In such an important task, you want to choose like-minded people who respect your goals and wishes.
- What about financial mandates? This person makes financial decisions for you.
- Have you designated a medical directive to make medical decisions if you are unable to do so?
Get in touch with a real estate planning attorney (now is the time to take advantage of it) company profit If you have) get drafts or updates to these documents.
9. Set new goals (personal and financial)
I couldn’t help but post my year-end post and talk about setting new goals.
Take time for reflection and introspection. think carefully,
- What progress have you made against your goals this year?
- What new goals would you like to set?
- Have your priorities changed?
- How can your money better support what you want in the new year?
Goals set the tone for your financial plan. It is what gives the plan heart, life and meaning.creation of Goal-based financial planning It helps you keep your eye on the prizes: the things that matter most in your life.
Remember that there are only 24 hours in a day, 7 days in a week, and 52 weeks in a year.
We wish you a peaceful, joyful and fulfilling New Year. See you in 2023.
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