For many, the new year is a time of renewal and reinvention, which makes it the perfect time to optimize your personal finances for 2022 and beyond. What financial, business, or life priorities do you need to address in the new year? Here are some ideas on how to get started:
Review your financial plan. This is a great time to review your financial plan to ensure that it is still reflective of your personal goals. A financial plan is a living document, and as such, it should be revisited and adjusted regularly. Having a plan in place will make it easier for you to track your progress throughout the year and will help you set specific short- and long-term goals and develop clear strategies on how to achieve those goals. Don’t have a financial plan yet? The team at Kendall Capital can help with that! Having a financial planner by your side can help you ensure that you do not make any uninformed decisions. After all, these professionals might have researched and studied hard to pass their FINRA certification (with hours of study sessions and taking series 7 practice exam to understand the concepts).
Create a spending plan. Notice I used the term “spending plan” there-not “budget.” Budgets often feel restrictive, complicated, and rigid. For this reason, most people don’t enjoy the process of “budgeting.” In fact, they dread it, which is why most folks struggle with sticking to that process. Here’s what you can do instead: create a spending plan to use as a roadmap for how you’ll spend your money, focusing on paying yourself first (i.e., treating contributions to your savings goals and retirement accounts like any other household bill). Once you’ve worked out how much of your income you’ll use to “pay yourself” and how much to direct to non-discretionary expenses like housing and utilities, you can feel empowered to freely spend the rest on whatever you like! This less restrictive approach to mindfully putting your money to work for you is quite effective at helping people spend mindfully without overly restricting.
Double check your contribution to your retirement plan at work. Periodically, the IRS increases the maximum allowable annual contribution to employer retirement plans, so New Year’s is a great time to double check that you’re making the most of your plan. For 2022, the 401(k)-contribution limit has been increased to $20,500 (the catch-up contribution for those over 50 remains the same for this year, at $6,500).
Did you forget to fund your IRA or HSA last year? Don’t panic-there’s still time! You have until April 15, 2022 to make a “prior year” contribution to a Traditional IRA, Roth IRA, or Health Savings Account (HSA) for 2021. You can stash away up to $6,000 in an IRA for 2021 ($7,000 for those over 50). The 2021 HSA contribution limit is $3,600 for single coverage or $7,200 for family coverage (plus an extra $1,000 if you’re over 55). If you’ve already fully funded these accounts for last year, consider going ahead and checking this year’s contribution off the list.
Spend down your FSA. If your employer offers a grace period to use up Flexible Spending Account (FSA) funds from the 2021 plan year, that grace period expires on March 15th. Check out the list of eligible medical expenses at: https://fsastore.com/fsa-eligibility-list.aspx
Check on your credit report. You can get a free copy of your credit report from www.annualcreditreport.com. You can also regularly monitor new activity and alerts on your credit through Credit Karma. They also provide helpful tips for building credit, but they’re funded by affiliate links for credit card companies, so be wary!
Review your insurance policies to make sure you aren’t over- or under-insured. Review all your policies-homeowner’s, auto, disability, life, business and long-term care insurance. Does the policy need a risk management plan? Are the limits adequate? Should the deductibles be raised? Is there a less expensive policy with similar coverage? Are you taking advantage of all the discounts offered to you by your insurance providers?
Well, websites such as www.insurance.com and www.policygenius.com provide quotes from several insurers so you can compare and find the best coverage for the best price.
Hire a fee-only fiduciary advisor. In our increasingly complex world, if you are struggling with questions regarding your current or future financial situation, you are not alone. Having a trustworthy professional in your corner to help guide you as you navigate financial decisions can help you reduce stress, build confidence, and feel empowered to spend your money on the things that truly enrich your life. At Kendall Capital, we help Middle-Class Millionaires put their money to work for them instead of the other way around. Give us a call today and let us help you make 2022 the beginning of an even brighter future for you and yours.
