Many Americans set goals for the new year that involve getting in better shape or cutting bad habits, but one expert says you shouldn’t ignore your financial health when planning for self-improvement.
David Ragland, CEO of IRC Wealth and a certified financial planner, provided FOX Business with a list of financial New Year’s resolutions to help you stay on track for 2023.
Ragland recommends reviewing or setting up a monthly spending budget as part of planning for 2023. He suggests reviewing where your money is going, using a three-month average to smooth out the peaks and valleys, and looking for ways to get more back for each crown.
Update your personal balance
According to Ragland, January is an excellent time of year for people to take stock of where they stand financially.
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“Spend time writing down your assets and liabilities so you can see the progress you made in 2022 and to help you set goals for 2023,” he suggests.
For anyone ending the year with credit card debt, Ragland recommends making a list of the amount owed and the interest rate on each card. Launch a plan to pay them off, focusing on the card with the highest interest first while making minimum payments on other cards.
The financial adviser also suggests calling card companies and asking for an interest rate reduction on cards with high interest rates. If a company declines your rate reduction request, consider a balance transfer to a card with a lower rate.
Those with mortgages may want to make a plan to pay it off faster. Ragland suggests making bi-monthly payments to speed up the repayments. Or you can gradually add a little extra with each payment, starting with $50 to $100 per month and then increasing it by adding a few dollars each month to the extra payment amount.
Increase pension contributions
The IRS has increased the annual 401(k) contribution limits for individuals in 2023 to $22,500 for those under 50 and to $30,000 for those older. These increases also apply to 403(b) and 456 plans.
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The limits for individual retirement plans (IRAs) will also be higher, at $6,500 for those under 50 and $7,500 for people 50 and older.
Aim to maximize these, if possible, to take advantage of the tax savings of these long-term investment plans. Did you receive a raise in the fourth quarter of 2022 or expect one in the near future? If so, you should consider using the salary increase to get closer to your retirement goals.
Be sure to review your employer’s 401(k) match and try to contribute at least the same amount to the plan to meet that threshold.
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Ragland also suggests automating your savings.
“Smaller, more consistent after-tax savings in retirement and investment accounts lead to big gains in the future,” he says.
Take the time to analyze your investment portfolio and consider rebalancing it if you are “overweight” in certain sectors. If you have a counselor, says Ragland, set up a meeting to review your progress and any changes that may be appropriate in the new year.