For many, the beginning of the year signifies a fresh start, and since it’s the season of New Year’s resolutions, it’s the perfect time to revisit your financial plan and find new strategies to boost your finances.
Goal setting is an important exercise to prepare for the year ahead, and setting financial objectives can help guide your financial planning process for the new year. Goals should be realistic and achievable in both the short-term and long-term. Whether you want to pay off debt or increase your savings for a new home this in the upcoming year, there are several steps you can take to begin preparing your finances.
Review Your Budget
Adhering to a budget will make financial planning simpler, and will make it easier to work toward the savings goals you have set for the new year. Budgets can be flexible, but a good place to start is using the 50/30/20 rule. Using this strategy, 50% of your budget covers your necessary expenses — housing payments, groceries, and transportation, for example. Then 30% of your budget should be allocated for your “wants,” whether that’s buying new clothes, paying for concert tickets, or saving for a vacation. The remaining 20% should be for your savings, including your retirement savings and emergency fund.
Maximize Retirement Savings
Each year brings you closer to retirement, and right now is the perfect time to find ways to expand your savings. If you received a raise at the end of last year, for example, your retirement savings contributions should reflect your increase in earnings. Remember, even increasing your contribution to a 401(k) or Individual Retirement Account (IRA) by a small margin can greatly impact your retirement in the long run. Since contribution limits often increase each year, you have an even greater opportunity to boost your savings. Remember you have until April 15, 2024, to complete your contributions to an IRA.
The Internal Revenue Service (IRS) modifies the maximum amount you can contribute to an IRA and 401(k) account every year. The 2024 contribution limits for those with IRAs or 401(k) plans include:
- 401(k) contribution limit: $23,000 (up from $22,500 in 2023)
- 401(k) catch-up contribution limit: $30,500 (for those over age 50)
- IRA contribution limit: $7,000 (up from $6,500 in 2023)
- IRA catch-up contribution limit: $8,000 (for those over age 50)
Revisit Your Estate Plan
As you update your financial plan for the new year, consider re-evaluating your current estate plan. Too often estate plans fall by the wayside, but not having your beneficiaries or will up-to-date can have significant consequences for your loved ones. If you went through a major life change like a marriage, divorce or loss in the family last year, you should be working with your financial advisor to update your plan and ensure your final wishes are put in writing.
Save Your Year-End Bonus
If you received a holiday bonus at the end of last year, it can be tempting to spend it on a large purchase like a new car or a big vacation. However, when you are deciding what to do with your bonus, think about your long-term financial goals and how that extra cash flow can help you achieve them. Contributing your bonus to your 401(k), putting it in your Health Savings Account (HSA) or using it to pay off debt may not be a fun way to spend your bonus — but it will benefit you in the long run and start you on the right track in the coming year.
Meet with Your Financial Professional
You don’t have to start your year off financial planning alone. You should meet with your financial professional at least once a year to do an annual review of your finances and go over strategies for planning in the year ahead.
At Emerj360, our financial professionals can help you prepare financially for the upcoming year and answer any questions you may have. From retirement savings guidance to making investment decisions, we’re with you every step of the way. You can schedule an initial meeting online or call 833-637-5360 to learn more about our services.
