Eva-Catalin / Getty Images
It seems the older you get, the quicker the holiday season sneaks up on you. While it may lead to convivial gatherings and holiday cocktails, the end of the year also signals that it’s time to tackle financial housekeeping.
Look back. 2022 review
Pension at any age. Get retirement advice that suits every stage of life
Do not worry. Doing a year-end financial review may be one of your most exciting plans in December, but it’s not hard to do. Plus, you’ll be setting yourself up for a more prosperous 2023. Here are five key areas to check before the end of the year.
Review your budget
It’s always a good idea to look at your budget every year. However, given the economic strain Americans have been facing lately with inflation, it’s important to make sure your budget can support your expenses next year.
Brian Greenberg, founder and CEO of Insurist, suggests first making a list of your assets and liabilities. Go through your bank statements, credit card statements, investments, and any other documents that show how much money you have (and how much you owe).
Take part in our survey. How long do you think it will take to pay off your credit card debt?
Next, find out how much money you have left after paying all your bills.
“This will help you figure out what percentage of your income goes toward expenses like rent or mortgage payments, utilities, food and clothing, anything else that doesn’t count as an investment or savings account,” Greenberg said. Then compare these two numbers and see if anything needs to be changed.
For example, Greenberg said, if you spend more than 40% of your income on discretionary spending, you may want to consider setting aside more money for savings or retirement. Now is a great time to adjust where your money is going and create a better spending plan for 2023.
Review your health care costs
Healthcare costs are one of the biggest recurring expenses people face each year, according to Ari Parker, “It’s not that complicated; author of Three Medicare Decisions to Protect Your Health and Your Money. December can be a critical time to find health savings.
“If you’re retired and on a fixed income, saving on medical bills is one of the most effective ways to improve your financial situation in 2023,” Parker said. “My biggest tip is to take time this month to evaluate how much you’re paying for doctor and specialist visits, prescription drug costs, and any ancillary benefits like dental, vision, and health care.”
You may be paying thousands of dollars on these bills alone, but Parker said you can find hundreds of dollars in savings by evaluating whether you’re on the right health insurance plan. Take advantage of open enrollment periods to make the necessary changes.
Explore retirement savings
Another important area to review at the end of the year is your retirement savings.
“TIAA conducted a survey earlier this year that found only one-third of American workers say they are very confident they are going to retire when they want to, afford the lifestyle they want in retirement, or live comfortably throughout retirement without running out. money,” said Jarrod Fowler, head of TIAA’s investment and advisory center.
At a minimum, you should contribute enough to take advantage of any employer match, which is typically 3% to 5%.
“Talk to your HR office about different retirement savings options and meet with a financial planner, which many companies provide,” she said. “They can help customize a program that will work best for you.”
Look for tax loss harvesting opportunities
Tax-loss harvesting can be a great strategy in December, according to Ksenia Yudina, CFA, founder and CEO of investment app UNest. This includes selling stocks, ETFs, mutual funds, and other losing investments to offset capital gains from other high-performing investments.
“Since the stock market has fallen this year and many investments have lost value, there are many opportunities to sell investments at a loss,” Yudina said. “If the investor has no capital gain to offset in the year in which the capital loss is accrued, the loss may be carried forward to offset future gain or future income; There is no expiration.”
However, Yudina added that investors should be aware of the “wash sale” rule. This states that if you sell an investment at a loss for tax loss harvesting, you cannot buy back the same investment within 60 days.
Check yourself out too!
Ultimately, Yudina said, it’s important to recognize and moderate any internal conflicts.
“Even the most sensible financial solution can fall victim to icky human emotions,” he said. “Impulse purchases, especially around the holidays, may fill a temporary hole, but will likely make you feel less star-struck in the New Year.”
So be sure to take some time to relax, reflect, and identify any spending motivations before they get the best of you.
“Train yourself to stay focused on the ultimate goal of financial independence for you and your children,” she said. “Once you’re sure your priorities are clear, budget wisely for holiday spending.”
More from GOBankingRates
Comments