9 Financial Moves to Make Before You Ring in 2023
Nine takeaways:
Amid a great deal of uncertainty, we should all be looking for ways to prepare our finances for the year ahead. This article provides 9 tactics you can take to do so:
- Update Your Budget – New market conditions call for a new, and possibly more conservative, budget. A disciplined approach to spending can alleviate the burden of stress that comes from spending more than you earn.
- Make a Plan for Your Student Loans – For those with student debt, note that federal student loan payments are still paused. That said, do not anticipate that pause being indefinite; be careful with any money saved. Be ready for the payment pause to come to an end. MAP suggests continuing paying down any student debt that you may have as deferred interest will offer advantageous benefits to pay down principal faster.
- Open a high-yield savings account – Banks like Capital One are offering yields as high as 3% (be weary of fees). MAP encourages buying low-risk fixed income investments with cash reserves to enhance yield on your cash.
- Prioritize paying down high-interest debt – Rising interest rates are good for savers but can make your debt more expensive. If interest rates keep rising, consider consolidating CC debt with a personal loan, which can be more cost-effective if the loan has a lower APR. Analyze your debt, and find a deal that best aligns with your goals.
- Save a little extra in retirement accounts – In 2023, the contribution limit for 401(k)s increases to $22,500 (and to $30,000 for those over 50 years of age). Even if you can’t max out retirement contributions, try increasing them slightly. Even a small amount can add up generously over time. In lieu of employer-sponsored retirement accounts don’t forget about your Traditional and Roth IRA accounts which have contribution limits up to $6,000.
- Spend down your FSA – If you have a Flexible Spending Account through your health insurance, you likely lose unspent money when midnight strikes on December 31st. Check out FSAstore.com or Amazon’s FSA store to easily find products and services eligible for your remaining funds.
- Check Your credit report – Now is the time for a check of your credit report for inaccuracies or possible fraud, or just to see what adjustments are needed to bring up your score. Go to https://www.annualcreditreport.com/ where you can access Equifax, Transunion, and Experian for free.
- Evaluate tax loss harvesting opportunities – It has been a turbulent year in the markets. Tax loss harvesting is a strategy that reduces capital gains taxes. It may be worth asking your financial advisor about this strategy.
- Consider a Roth Conversion – A down market can be favorable when converting a Traditional IRA to a Roth IRA as it can potentially result in a lower tax bill at conversion. Also, any market rebound that might occur will grow tax-free in a Roth Account. While this strategy sounds attractive and is potentially viable for some, it warrants further conversation with your advisor and/or CPA.
From Alicia Adamczyk for Fortune
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