By now, many people already have let some 2022 resolutions slip, but any time is the right time to start making and saving more money – not just for this year, but well into the future.
We talked to Philip Herzberg, a lead financial adviser at Team Hewins, who offered some great personal finance strategies and tips on how to stick with them.
Refinance Mortgages and Student Loans
If you plan to refinance your mortgage and/or student loans, do it soon.
Do not leave the opportunity to lock in today’s low mortgage rates until 2023. It may be the right time now to refinance to lower your monthly payments, which are most people’s largest monthly expense and largest asset.
Also, consider refinancing your federal or private student loan payments to take advantage of lower interest rates. Be mindful that you will need to start making student loan payments again soon with federal student loan forbearance expiring on May 1. (As of Jan. 23, Bankrate’s average refinance rates were 2.99% for a 30-year fixed refinance and 2.28% for a 15-year fixed refinance.)
Do a Little Homework
Committing yourself to learning as much as you can about the financial markets, the nature of money, and investments is a good first step to creating long-term wealth. You can learn more about successfully managing your finances by researching online, taking personal finance classes, or reading investment books. While there may be a plethora of information online or on social media, you should only take investment advice from trusted sources. Set a goal to read every month at least one publication that will give greater insight into a specific area of financial interest.
Prioritize Your Health and Wellness
Use the new year as an opportunity to feel more in control, mentally and financially. Consider taking advantage of any employer wellness resources for physical, mental, and financial health. Many employers offer financial-education programs and digital learning tools, which can supplement the advice you may get from advisory professionals. Utilizing these resources can help you not only bring a sharper version of yourself to the job, but also set you up to make better use of other workplace benefits, such as a retirement plan, equity compensation, and group insurance.
Treat Yourself: Maximize Your Credit Card Rewards
Maximize your credit card cash-back, miles, and points rewards. Apply for a new rewards credit card if you do not have one already. There are several reward credit cards offering generous enrollment bonuses, such as 100,000 miles for spending $3,000 during the first three months. Bonuses are frequently valued at $1,000 or more.
Review and Streamline Monthly Subscriptions
Look at every service you subscribe to and see if there are any you could eliminate. Quite frequently, you sign up for a free 30-day trial and do not remember to cancel when the trial ends. You subsequently forget to cancel the subscription before the next automatic deduction. Consider using an app, such as Truebill, to track subscriptions and to cancel unwanted services you no longer need.
Update Your Designated Beneficiaries
Revisit your beneficiary designations after you have experienced any recent life-changing situation, such as a remarriage or divorce. Check the beneficiary designations on your insurance policies and retirement and bank accounts to ensure they are up-to-date and reflect your current intentions. Beneficiary designations supersede the provisions of wills or trusts, so verify that your will and any financial account or insurance policy are aligned in their directives.
Ramp up Retirement Savings
Continue to stick to your long-term plan by adding to your tax-advantaged retirement accounts. Use 2022 to boost or maximize contributions to your 401(k)s, as well as your IRAs and Roth IRAs. Pay yourself first by deferring more of your increased 2022 wage income towards your workplace retirement plan to get the full employer 401(k) match, since it is essentially free money. Invest in a globally diversified portfolio of assets to reduce your risk but still achieve attractive returns. Do not be tempted to sell during market downturns.
Start a 529 Plan
As college tuition costs rise, it is especially important to save early with a 529 plan, a tax-advantaged account to help pay for a child’s education. By choosing the appropriate plan and following a sound investment strategy, you can accumulate more towards a child’s education and grow your investments tax-free. You can utilize a 529 plan as part of a tax-free gifting strategy. For 2022, you can make a tax-free gift of $16,000 per beneficiary as an individual or $32,000 as a married couple. Alternatively, you can front-load five years’ worth by contributing $80,000 as an individual or $160,000 as a married couple.
