The start of a new calendar year is the perfect time to review your current financial situation and take stock of your financial progress over the past year.
But there are also practical reasons to use the new year to revisit your money management and long-term financial plans—especially with a new tax year and new financial opportunities commencing as the calendar flips forward to 2022.
Want to set yourself up for greater financial success in the coming year? You can start by getting a running start on your 2022 goals. Here are some tips for entering the new year with financial momentum on your side.
Review your past year of progress toward saving and other financial goals.
If you’ve been working toward financial goals over the past year, the end of the year is the perfect time to take stock of your progress. Did you succeed in sticking to your savings and/or investing plans? Did you go above and beyond or did you struggle at any point during the year?
This might also be a good time to review the growth of investments and other accounts throughout 2021. How did your financial net worth change? Are you focused on the long game with your investments or are you worried you need to adjust your strategy? Though you don’t want to make any impulse decisions, it’s helpful to evaluate your own satisfaction with your financial progress as you make plans for 2022.
Revisit your budget and adjust your spending limits.
Look back at your past year of spending to identify opportunities you could have taken to improve your spending. Did you blow your entertainment budget? Could a New Year’s resolution to swear off coffee create a new savings opportunity for you?
A good budget features spending goals that are achievable—which means that, if you’re constantly blowing your budget in one category, your current goal may not be realistic given your spending needs and/or habits. At the same time, if you’re falling short of savings goals, you may require some tough decisions and cutbacks.
Project any potential changes to your income in the year ahead.
Your income level will go a long way toward determining your ability to reach your financial goals. If you have built-in raises at your job or you’re anticipating an increase in earnings in 2022, consider how this might affect your financial picture. Is this increased income going to be eaten up by rising living costs? Or can you take the proceeds of these earnings and increase your contributions to other financial goals?
Though you may be tempted to increase your standard of living, first consider how you might use this income boost as a launching pad to greater financial success.
Assess your overall financial security heading into 2022.
As you enter the new year, it’s worth taking a hard look at your own financial stability. This stability should be evaluated in terms of your income stability, as well as your financial cushion if you experience a loss of income, medical expenses, or other surprise bills.
Depending on your current financial security, you may want to increase your emergency fund, put more money into liquid investments, or take other steps to brace for unexpected financial events. On the other hand, if you’re feeling financially stable, you might be more inclined to put money toward other financial goals, which could range from buying a house to funding new investments.
Set contribution amounts for 401(k)s, FSAs, and Dependent Care accounts.
Every year, you have an opportunity to set new contribution limits for different accounts offered through your employer. This includes health savings plans and retirement accounts.
Several of these contribution limits are increasing in 2022, so you may want to increase your contribution accordingly. In the span of a few minutes, you could effectively reduce the taxes you will pay in the year ahead, and fund accounts that will strengthen your financial stability.
Check in with a financial advisor.
As you adjust your spending and saving strategies and prepare for the year ahead, it’s helpful to review your progress and future plans with a financial advisor.
A financial planning professional can look at your past progress, your future plans, and your long-term goals to make sure you’re accounting for all of the scenarios and potential challenges you may face along the way. And if you’re uncertain about certain investment strategies and financial planning approaches you agreed to in the past, you can review this strategy with an advisor and make an informed decision on how to move forward.
Financial success always starts with a strong plan for the future. Want to make sure your tax planning is optimized for this year and the years to come? Get started by viewing our free guide, Tax Planning 101: The Beginner’s Guide for Individuals.
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