The economic climate is changing rapidly, and it is no secret that the best time to get out of debt is now. But where should you start, and is it worth working on your finances now, or should you wait until the new year for a fresh start?
The answer is both! Here are a few tips for closing out your books for 2021 and creating an actionable strategy to reach your financial goals in 2022.
Review your credit score and debt
You must know where you stand when it comes to your debt so that you can make a plan to get rid of it in the new year as quickly as possible. While it might feel like you’ll never get out of debt, creating an actionable strategy can make it much easier than you think. Try using this credit card snowball calculator to determine what your next steps should be to ensure you’re debt-free by 2023.
Revisit your insurance policies
If you have any insurance policies or other accounts where you’ve listed beneficiaries, it’s always a good rule of thumb to review those at least once a year. Check the deductibles and term limits against both your budget and current living situation to determine whether or not these policies are still relevant for your life or if they’re just wasted money.
Contribute to your retirement accounts
IRAs have a maximum yearly contribution allowance that you should try to hit every year for both the tax and compound interest benefits. If you’re able to throw a few more bucks into your retirement account before the end of December 31st, you’ll be able to use those deductions for your 2021 taxes.
Review your tax withholdings
The IRS’ website has a tax withholding calculator that can help you determine whether you’re withholding too much or too little of your paycheck. If you get a tax refund every year, you’re most likely having too much withheld. While it’s great to get a big check every April, that money could’ve gone towards improving your financial situation and paying off debt, used for large purchases, or put into savings to accrue interest.
Explore options to optimize your finances
Due to the current state of the economy, interest rates have been rapidly fluctuating. However, the rates aren’t standard across all companies, and you might be eligible for better rates at a different bank, lender, or credit card company. Check your current rates for your savings accounts, loans, and credit cards, then look around to see if there are better promotional offers you can take advantage of in the new year.
The bottom line
It’s easy to make progress on your personal finances in the new year, but that doesn’t mean you have to wait until then to make progress. The best way to stay on the right path is to take an honest look at your expenses and make sure they align with your goals. A few small sacrifices now could lead to a big payoff down the road in 2022.
