It’s officially 2024, which means your final task of the year is waiting! Of course, amidst all the exciting things happening at this time of the year, financial chores are the last thing you want to think about. However, these tasks are essential for maintaining your finances and starting the New Year with your best foot forward.
As the past year has come to an end, this is the perfect time to review your strategies to maximize your savings and set yourself up for a successful financial year. By practicing innovative financial management, you can prioritize your spending, reduce stress, make informed decisions, avoid wasting money and time, and use resources wisely. Well, it doesn’t sound that bad now, does it? In light of this, let us discuss your financial responsibilities as the New Year begins.
Verify the Current Status of Your Emergency Fund Corpus
Remember to check the status of your emergency fund corpus as the brand-new year approaches. If you have no emergency savings, plan it out immediately. In addition, once you begin making contributions to your emergency fund, you have to examine if you are achieving your goals and when the fund will be completely established. Each individual might not have the same emergency fund corpus, but it can be approximately six to twelve months’ worth of living expenses.
Invest In a 529 Plan
For parents with kids, contributing to a 529 plan before the year ends might be a great idea. These kinds of accounts enable the growth of money, which can be withdrawn tax-free for approved costs related to education. No federal tax deduction is required for contributions made to 529 plans, barring a few specific states. If you wish to qualify for the state tax deduction, ensure to make your contribution by December 31.
Examine the State of Your Finances
You need to look back at the year that has passed and assess exactly how your finances have altered since the very start. As the New Year dawns, we advise you to address the following concerns:
- Were you able to keep up with your monthly budget, especially over the holidays?
- Were you able to succeed in controlling your impulsive purchases?
- Did you keep up with your investing and saving goals by setting aside a portion of your income?
- Did your earnings increase in line with your spending?
Evaluation of Asset Allocation
You may already know that the stock markets stayed unstable for most of the past year due to the conflict between Russia and Ukraine. At this moment, you would have had a lot going on in your mind, so if you’re not feeling uneasy about it, you may need to reconsider your asset allocation. Without a doubt, volatility can be worrisome. It may be wiser to allocate more of your investment to fixed-income assets and lower your overall equity exposure. Undoubtedly, we can all agree that having a high equity exposure due to the fear of missing out is not as important as having peace of mind.
Consider the Minimal Distribution
Once you turn 70 ½, you must start collecting minimum withdrawals from your traditional 401(k) or IRA. In general, the amount you will receive is calculated by a formula that accounts for both your age and your account balance. It is commonly referred to as RMD or a required minimum distribution. Furthermore, if you inherit an IRA, you will have to take an RMD. Remember that penalties will be applied if you fail to remove the RMD from your account by December 31. A tax equivalent to 50% of the necessary distribution amount can be used if you fail to take an RMD.
Review Your Insurance Plans
A complete evaluation of your insurance plans is the first thing you should do for the New Year 2024, especially if you still don’t have health and life insurance. Nevertheless, even if you are already covered, you must verify that the insured sum is practical and in line with family members’ growing incomes. It is equally important to consider whether or not the plan needs the addition of appropriate riders because you do not want to be stuck with an outdated plan.
Obtain Your Social Security Statement
Get a Social Security Statement to check your estimated retirement benefits at 62 and your full retirement age at 70. In addition, the statement will reveal if you have accrued sufficient credits to be eligible for Medicare when you turn 65. Since your retirement benefits are determined by your earnings record, which is included in the statement, it is best to review the details annually.
The fact that your Social Security benefit is updated yearly to account for inflation is another benefit available to you, and is known as the COLA or cost-of-living adjustment. The COLA might not amount to much for some years, but it might in others, so it’s important to stay updated.
Obtain Your Credit Reports
Everyone has a legal right to a free annual copy of their credit reports from any of the three main credit bureaus: TransUnion, Experian, and Equifax. Moreover, Innovis is an additional bureau where you can get a free credit report.
Check all the data on your credit report, such as credit cards, mortgages, auto loans, and other loans, to ensure accuracy and catch any mistakes before they impact your financial standing. Also, remember to verify if the address and other personal data are accurate, especially if you have moved in the recent past. Following each bureau’s instructions for reporting and fixing errors is highly advisable.
Make Sure Every Nominee Is In Place
Once you have your will in place, the next important step is to ensure all nominees are present. In your absence, the nominees will ensure that funds from your investments and insurance go to the chosen recipients without any legal issues.
Consider Freezing Your Credit Reports
Credit freezes can protect your identity and block anyone from creating new accounts under your name on your credit reports. Most creditors request access to your credit report before extending new credit. If your credit report is frozen, the creditor will not get access to it and is unlikely to approve the credit. Therefore, if you do not plan to open any new lines of credit in the foreseeable future, it might be wise to freeze your reports to protect against frauds.
