‘Tis the season, and not just for gifts and sweet treats – as we approach the finale of 2023, now is the time to start thinking about your finances! See below for some festive finance tips:
- 401k/403b: Retirement plans through your employer. Make sure you know how much you are contributing and how much your employer matches! It’s a good idea to contribute at least that much (free $$$). Also be aware of plans that automatically increase your contribution % every year and how that affects your paycheck! For younger professionals, a target date fund is a low-cost investment option that will automatically become more conservative the closer you get to retirement.
- HSA/FSA: Flexible Savings Accounts are use it or lose it – make sure you deplete these funds by 12/31 of each year. Tons of things qualify for reimbursement, including chiropractic, massage, acupuncture, OTC items if recommended by a doctor – see a complete list here. If you have an HSA, make sure that you are contributing as much as possible – these funds go in pre-tax from your paycheck, can be invested and grow tax-deferred, then are tax-free when withdrawn for any qualifying expenses in perpetuity. We call that a triple threat! The 2023 contribution limit for a single taxpayer for an HSA is $3850.
- IRA/Roth: Even if you contribute to an employer plan, you can also contribute to a traditional or Roth IRA. A Roth is a great type of account to set up early – once in place for 5 years, anything withdrawn after age 59 ½ is tax free! This is in contrast to traditional IRAs/401ks where distributions are taxed as ordinary income. You can contribute directly to a Roth if you make less than $153k in 2023 (single taxpayer).
- 529 for education expenses: If you own a New York State 529, you can deduct $5000 on your state taxes ($10k if married) per year for any contributions made! Great for new parents!
- Credit cards: Be aware of reward structures on cards and see if you have points that need to be redeemed – another source of free $$$! Also be aware of interest rates on each card and do your best not to carry a balance – don’t spend more than you have in your checking account!
- Credit score: Most banks/credit cards offer free credit reports, which are also available here. Be cognizant of things that affect your score, like number of inquiries, credit utilization, late payments, length of time credit established, etc. A good credit score goes a LONG way!
- Monthly savings: Consider setting up an automatic transfer each month to a savings account. Even a small amount of $25 can make a large difference over time and you most likely won’t notice!
- Money market: Interest rates are at historic highs right now. If you have idle cash that isn’t earning any interest, you could be receiving over 5% in a money market fund. These are available at any self-directed institution (think Schwab, Fidelity, , ETrade, Merrill Edge, Robinhood etc.). Beware of CDs from retail banks which lock up your money for longer periods.
- Student loans: Payments resumed this year, so make sure you are deducting any interest paid!
- Tax losses: Harvesting losses on any investments can be helpful to offset gains, and losses have unlimited carryforward. Consider taking these losses this year (i.e. cryptocurrency) if your income has increased or if you anticipate having a tax bill.
- Budget: **Knowing what you spend doesn’t mean you have to reduce it. I’m not here to tell you to save more – in fact, I’m a fan of spending while we can since nothing is guaranteed! BUT, knowledge is power, and the more you know, the better prepared you are for the holiday season! Numerous websites and apps offer budgeting software, and many of us don’t even know what we spend. Your bank likely has a program – if not, popular apps include Mint (Credit Karma) & You Need a Budget (YNAB).