Skyshear | E+ | Getty Images
New year, new you? Probably not.
One of the revelations likely to come in 2023 is that you’re largely the same person as you were last year. You don’t suddenly love running or taking vitamins.
But sometimes it’s good when things don’t change, and the fact that many of the money moves we should be making stay the same from one year to the next at least gives us more time to try to get them right.
Here are three of the most important actions to take now (and at the start of each year), financial experts say:
1. Update your budget
“The new year is a chance to reflect and start fresh,” said Brian Bender, head of Schwab Retirement Plan Services. “That should include your financial plan.”
Bender recommends making a list of all the major expenses you anticipate for the coming year, including a possible move, marriage, or an expensive vacation.
You should factor these costs into your budget and be prepared for them, he said. If you’re changing jobs or anticipating a raise at work, you’ll want your new budget to reflect that.
To understand how much you’re spending, look at your purchases over the past few months, said Kimberly Palmer, personal finance expert at NerdWallet.
“From there, you can create a rough estimate of where you want your money to go,” Palmer said.
A helpful rule of thumb, she added, is the 50/30/20 budget, which allocates “50% of your net salary to needs, 30% to wants, and 20% to savings and debt.”
2. Check your emergency savings
A solid emergency savings account is one of the best ways to get a good night’s sleep, said Cristina Guglielmetti, president of Brooklyn-based Future Perfect Planning.
The amount of money people need to get salted varies, Guglielmetti said, and the beginning of the year is a perfect time to assess how much is best for you.
To start, you typically want to calculate your main monthly expenses, including rent, groceries and utilities, and pet care, and then set a number of months you want the account to cover in the event you lose your job. (Of course, that money would also come in handy for a one-time emergency like an unexpected car repair or medical bill.)
“It could be as low as one to three months, especially if there are other savings pools to draw from, the ability to have family support, or if one or both jobs are very stable,” Guglielmetti said. “Or it can take nine to 12 months if someone prefers that kind of security.”
She recommends keeping the money in a high-yield savings account. You should just make sure that any account you put your savings in is FDIC insured, which means up to $250,000 of your deposit (per account holder, per bank) is protected against loss.
3. Make sure you’re on the road to retirement
The start of a new year is the best time to review your retirement goals and make any necessary changes, experts say.
Some people could potentially take advantage of the increased annual contribution plan limits for 401(k) job retirement plans ($22,500) and individual retirement accounts ($6,500), Guglielmetti said.
Employees aged 50 and over may qualify for additional catch-up contributions.
More from Personal Finance:
5 money moves to prepare you for financial success in 2023
Use wage transparency to negotiate a better salary
Retirees are fleeing stocks to “safer” investment oases
But even a small increase in your savings rate can be big, said Rita Assaf, vice president of retirement at Fidelity Investments.
Assaf provided an example: For someone 35 who makes $60,000 a year, a 1% increase in their retirement savings (or less than $12 per week) could generate an additional $110,000 by retirement if one of an annual return of 7%.
“If you have access to a 401(k) with a company match, try to save at least at your company match level,” Assaf added. “If you don’t, it’s like leaving free money on the table.”
Comments are closed.