It’s January, and you’re likely motivated to start the year off right. This is a great time to take stock of your financial situation and plan for the year ahead. Here are 10 actionable tips to help you take control of your finances and set yourself up for a secure and prosperous 2023.
Download the 2023 update on Tax Rates and Important Savings Numbers!
Download our 2023 checklist of action items and financial considerations for the New Year!
1. Set financial goals for the year
Whether you want to save for a down payment on a house, pay off debt or simply build up your savings, it’s important to have specific, measurable goals in mind. If you make financial decisions jointly with a partner, schedule time for a family discussion and perhaps make a plan to continue discussions throughout the year.
2. Plan your spending
By knowing exactly how much money you have coming in and going out each month, you can make informed decisions about how to allocate your funds. Perhaps you’d like to spend some time creating a budget. If you don’t like budgeting, plan to pay yourself first. Some people prefer to track their spending. You could create a spreadsheet for your spending in the last three months, plan to track spending or use a service like YNAB to get started without establishing your own infrastructure.
Check out our Podcast Episode “Simple Budgeting Tips with Melissa Fradenburg” for more budgeting tips and resources.
3. Pay off high-interest debt and manage your emergency reserves
Interest rates have made a radical shift higher over the past 12 months. If you have unpaid debts, this may already be resulting in unpaid interest and/or difficult loan servicing. Credit card debt can be especially harmful to your financial well-being, as it accrues interest quickly. Make a plan to pay off your high-interest debt as soon as possible. If you have racked up personal loans, haven’t been making student loan payments or generally need a debt payment plan, make sure you start to plan to tackle rather than putting off for another time. Check out our recent podcast on paying down debt!
Save for emergencies. Life is unpredictable, and it’s important to have a financial cushion in case of unexpected expenses. Aim to have at least three to six months worth of living expenses saved in an emergency fund. Sometimes, people come to us as financial planners embarrassed that they have too much cash on hand. This is rarely the case. Adequate cash reserves is critical to staying on course with other financial priorities.
Since interest rates are so much higher now, you may be able to increase the interest you receive on your emergency reserves. High yield money markets, certificates of deposits and other interest-bearing accounts may offer an attractive alternative to bank accounts which tend to be lower.
4. Invest in your future and boost your savings rates
Whether it’s adding to your company’s retirement plan at work or a personal investment account, it’s important to start saving for retirement as early as possible. It’s important to remember that many contributions limits have changed with increased amounts allowed for saving and investing.
Make sure to review your planned savings in 401ks, retirement plans, taxable accounts, etc. Even if you aren’t maxing out, making a cost of living adjustment annually can help you to be on track for or catch up with retirement. Further, you want to periodically review your investment strategy to ensure that funds aren’t left in cash that should be invested and also make sure to rebalance if needed.
Not sure where to start on investing adjustments? Listen to our recent podcast on 2023 Investment Mindset.
5. Map Out Your New Year
You may not be able to complete everything on your financial to-do list this week. That’s okay. We love when you calendar your year. Here are some suggestions:
- Set up a financial check-in for yourself with a partner or with a financial accountability partner. Update your numbers, work on pain points and reward yourself for a job well done during this time.
- Note important dates like benefit enrollment periods, time to gather tax documents, tax estimated payment dates and insurance renewals. Put them in your calendar so things don’t sneak up on you.
- If there are things you want to accomplish, but you can’t do them all right now, set financial themes for quarters or months so you can have a plan on when you’ll be holding yourself accountable to tackling things.
6. Be smart with your taxes
Make sure you’re taking advantage of all the deductions and credits available to you, and consider hiring a tax professional if you’re unsure about how to file your taxes.
As tax season approaches, being organized can give you a huge advantage. Create a big file or folder for physical tax documents and create a secure online place to put any electronic tax information that you receive. Talk to your spouse or partner about how you’ll share the responsibilities for tax preparation. If your partner handles the taxes and you feel like you’re being left out, have a conversation about sharing information and knowledge this tax season.
Read our 2022 blog post on Preparing for Your Tax Return.
If you’re reading this and feel that it’s time you stop doing taxes on your own because of challenges and complexity, it’s time to start working to find a CPA or enrolled agent who will help you with your taxes this year. If you feel like you’re paying too much in taxes, discuss the need for tax planning with your CPA and/or financial planner.
7. Protect your assets and loved ones with insurance
Make sure you have insurance coverage for your home, car and other valuable possessions. With significant increases in property values over the last several years, ensure that you are adequately covered with an insurance review. You will want to check whether your premium is reasonable as well as that you have adequate coverages.
Other important financial insurances to consider include life insurance (critical especially if you have dependents or your income could not be replaced with outside assets), disability insurance if you are unable to work and long term care insurance for people who want or need to protect against the costs of nursing or in-home health care later in life. Finally, umbrella liability can protect as an excess coverage if you have a significant event and are liable for amounts in excess to your other insurance coverages.
8. Review, set-up, or reduce automatic payments
Set up automatic payments for your bills, if possible, and make sure you pay them on time to avoid late fees and damage to your credit score. That said, nowadays, so many things can be set up to auto-pay that you may lose track of what you’re actually paying for and the services that you’re receiving. Make sure to review the payments that are occurring including reviewing bank and credit card statements as well as other payment forms like PayPal, Apple or Google services.
9. Ensure legal documents are in place
Too many people neglect or ignore estate planning because it can be unpleasant to contemplate, expensive or they don’t know where to start. Almost everyone should have a will, power of attorney and medical directives. Many people may also want to consider a revocable living trust for more complex financial situations.
If you’re not sure where to start, you’ll likely want to talk to an attorney who specializes in estate planning. There are also digital solutions available for some people like Trust and Will, although it depends on the level of complexity of your circumstances. Some people have legal services included with their company benefits which can reduce costs.
Check out our recent podcast episode on Common Mistakes in Estate Planning with guest Chiara Mattieson.
If you have documents drafted, make sure the details within the documents remain appropriate. Review the list of people who are named in the documents, what you’ve asked to happen and the status of anyone who may be receiving funds from you. Make sure they are appropriate based on the information you have now and expect in the future.
10. Seek professional advice
If you’re feeling overwhelmed or unsure about how to manage your finances, consider seeking the advice of a financial planner or advisor. We often hear from people who don’t think they’re doing a good job, but feel like a financial planner would cost too much or aren’t sure where to start.
Financial planning can reduce anxiety and increase confidence with your money and thus your life. Ready to consider financial planning?
This is what the Pearl Planning financial planning process looks like, and you can schedule an introductory call here.
By following these tips, you can take control of your finances and set yourself up for a secure and prosperous 2023. If you want to stay apprised of opportunities for your money and markets in general, subscribe to the Pearl Planning newsletter here.
Investment advisory services offered by Pearl Planning, a DBA of Stephens Consulting LLC., an SEC registered investment adviser. Please remember that past performance may not be indicative of future results. Pearl Planning does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results.
Links are being provided for information purposes only. Pearl Planning is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. Pearl Planning is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.
Pearl Planning cannot guarantee that the information herein is accurate, complete, or timely. Pearl Planning makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Pearl Planning, or any non-investment related content, made reference to directly or indirectly in this presentation will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or a substitute for, personalized investment advice from Pearl Planning. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.
Diversification and asset allocation do not ensure a profit or guarantee against loss. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal. Pearl Planning does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. We cannot guarantee that the information herein is accurate, complete, or timely. We make no warranties with regard to such information or results obtained by its use, and disclaim any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
If you are a Pearl Planning client, please remember to contact Pearl Planning, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Pearl Planning shall continue to rely on the accuracy of information that you have provided. Please Note: IF you are a Pearl Planning client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian. A copy of Pearl Planning’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.pearlplan.com.
Melissa Joy, CFP®, CDFA® is President and Wealth Advisor at Pearl Planning. Reach out for a call today at 734.274.6744.