It may have seemed like only yesterday that we were enjoying summertime barbecues and gearing up for the start of the school year. But at this point, we’re actually in the final quarter of 2022. And so now’s the time to focus on year-end financial matters and tackle important tasks that could set you up nicely for 2023. Here are some essential moves to make over the next couple months — and they’re moves you don’t want to delay.
1. Boost your emergency savings
We can’t say for sure that a recession will hit in 2023, but many financial experts are warning that might happen. It’s a great idea to boost your emergency fund so if economic conditions worsen and your job becomes compromised, you’ll have plenty of money in your savings account to tap.
In fact, you really should make sure to have a minimum of three months’ worth of essential bills in your savings. Some financial experts will even tell you that an emergency fund with eight to 12 months’ worth of bills is more appropriate in these somewhat uncertain times.
2. Add to your 401(k)
This year, 401(k) plans max out at $20,500 for savers under the age of 50 and $27,000 for those 50 and over. As such, maxing out your 401(k) may not be feasible, and understandably so.
But that doesn’t mean you can’t try to sneak more money into your retirement plan. And you should definitely try to contribute enough funds from your own earnings to snag your full employer 401(k) match.
But don’t wait too long to increase your 401(k) contributions. Since those come out of your paycheck directly, your benefits or payroll coordinator might need time to process that change, so you’ll want to put in that request well before the end of the year.
3. Use up your FSA
Have money sitting in a flexible spending account? You may only have until Dec. 31 to use up your funds or otherwise risk giving them up. While some plans offer an extension or let you carry some money forward, your plan may not offer that benefit (though it’s worth checking either way).
Think about some of the medical appointments you’ve been putting off and start getting them scheduled. You can also look at renewing longer-term prescriptions or getting new eyeglasses to use up your balance.
4. Pay off costly debt
Owe money on your credit cards? As the Federal Reserve moves forward with interest rate hikes as a means of battling inflation, that debt could grow increasingly expensive for you. And if a recession hits next year, you won’t want it hanging over your head.
Instead, take a look at your budget and see if you can find ways to cut some costs and put more money toward your debt. You can also consider taking on a side hustle temporarily to drum up more cash.
5. Sit down with a tax professional
Maybe your income changed in 2022. Or maybe you inherited some assets, sold stocks, or experienced another event that could impact your tax situation.
That’s why now’s a good time to meet with a tax professional if you haven’t done so already. That person might be able to offer up some tips you can act on in the next two months to lower your tax burden and avoid a huge IRS bill when you file your 2022 taxes in 2023.
It may be hard to wrap our heads around the fact that 2023 is inching closer. But if you make these key moves before 2022 wraps up, you might find yourself in a much happier, stronger financial position next year.
In A Nutshell . . .
- The financial moves you make in the coming weeks could set you up for a successful 2023.
- These items are worth tackling — and the sooner, the better.
- Add to your emergency savings and retirement account, and consider meeting with a tax professional if your financial picture has changed.