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Your New Year's Financial Planning Checklist

Your New Year's Financial Planning Checklist

January 03, 2023
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This is an updated version of an article originally posted in December 2021.


Are we headed for a recession? Will stocks recover some of their losses from last year? Will inflation finally be tamed? Will the Fed continue to raise interest rates?

These are some of the many questions you may be thinking about as you try to figure out whether you need to make any adjustments to your personal finances and investments this year.

But, even with so many unknown factors, there are still steps you may wish to take regardless of what's happening in the markets or the economy.

Adjust your withholding taxes if necessary

You may not get your 2022 Form W-2 wage and tax statements until the end of the month, but your last paycheck will give you a good idea of how much was withheld in taxes. If the figures are similar to what you earned in 2021, you might want to slightly reduce your withholding rates (if you received a large refund last year) or slightly increase them (if you ended up owing taxes).

Keep in mind that the IRS has raised the standard deduction and adjusted income tax brackets for 2023, which could reduce your tax burden this year.

Your tax professional can help figure out your “withholding goldilocks zone.”

Increase your retirement plan contributions

Did you get an end-of-year bonus or raise? Consider using some of it to increase your contributions to your 401(k) plan accounts and IRAs.

In 2023 you can contribute up to $22,500 (plus an additional $7,500 if catch-up contributions if you’re over age 50) to your 401(k), 403(b) and 457 plan.

If you have an IRA, you can contribute up $6,500 in 2023, plus an extra $1,000 in annual catch-up contributions if you’re over age 50.

And, starting in 2024, the annual catch-up amount will be adjusted for inflation, potentially raising that amount significantly year after year. 

Review your investment performance—and adjust if needed

When you get your year-end investment statement, take a close look at how your portfolio performed as a whole and the returns for each account.

Because the stock market posted a loss for the year, chances are that you may have more money invested in bonds (or bond funds) and less in stocks (or stock funds) than your intended asset allocation.

When your asset allocation is “overweight” in either stocks or bonds, your portfolio may no longer reflect your desired balance of risk and reward.

If so, consider readjusting your stock and bond holdings to your targeted balance by selling some bonds and reinvesting the proceeds into stocks to restore your original target asset allocation. Or vice versa if your portfolio is still overweight in stocks. 

Now, this can be a very complicated task to do on your own, particularly in a taxable account where you’re trying to maximize capital losses to offset capital gains. This is why most people leave these decisions in the hands of an experienced investment adviser.

Organize your deductible expenses

If you’re able to itemize deductions now is a good time to start documenting them.

If you run your own business or earn money from a side gig, it’s important to understand how your earnings are taxed.

You may be able to deduct many of your business expenses, including some of the costs of your home office. Start going through your receipts and organizing them into cost categories such as meals and entertainment, office supplies, advertising, transportation and vehicle expenses and equipment purchases.

And remember, if you normally make quarterly estimated tax payments, you have until Monday, January 15 to make your last payment for tax-year 2022.

“Cash out” your Flexible Savings Account

If you have a flexible savings account (FSA) at work and haven’t depleted your 2022 funds, there may be hope. Your employer may offer a grace period of up to 2½ months in 2023 to use up leftover FSA balances from last year.

And, if you still haven’t submitted claims for reimbursement of qualified costs that occurred in 2022, your employer may allow a “run out” period of up to 90 days to get your claims in.

Alternatively, your employer may allow you to carry over up to $570 from your 2022 FSA account to use in 2023. This amount will increase to $610 for carryovers used in 2024.

If you’re struggling to find ways to use your leftover FSA funds, think about reducing your 2023 contributions if you’re still able to do so.

Review your credit history

The start of the year is a good time to check your credit score and make sure that no one has opened any credit card accounts in your name without your knowledge, especially if you plan on applying for a mortgage or home equity loan.

All three of the main credit reporting agencies, Equifax, Experian and TransUnion, allow you to request one free credit report per year. Instead of asking for them all at once, considering staggering each individual request over the course of the year. You can request these credit reports online at Annualcreditreport.com.

Get your children’s financial aid applications done

If you’re counting on your college-age kids receiving financial aid for the 2023-24 academic year, complete as soon as possible their Free Application for Federal Student Aid (FAFSA) application (https://studentaid.gov), if they’re looking for federally funded direct student loans, or their CSS/Financial Aid Profile application (https://cssprofile.collegeboard.org/) if they wish to be considered for scholarships.

Document your end-of-life decisions

It’s important for people of all ages to make sure they’ve documented their wishes should they become physically or mentally incapacitated. At the very least, assign someone you trust as a health care proxy who can make these decisions on your behalf and give someone financial power of attorney to handle your financial affairs. Also make sure that the beneficiaries for your retirement accounts and life insurance policies are up to date and that your will still reflects your wishes.

Protect your online security

Identity theft and online scams hit record-setting levels last year. Protect your online security by changing your online passwords to something that will be difficult for a hacker to figure out. Preferably, each should be a combination of capital and lower-case letters and numbers and special characters. And try to avoid using the same password on every site. If a hacker steals that password, they may be able to use it to access all of your online accounts.

Back up your data

If you can’t remember the last time you backed up your computer, now is the time to do it. If you don’t have the time or knowledge needed to do a full system backup, focus on saving your personal files to a flash drive, external hard drive or to the Cloud. If you have numerous photos and videos stored on your tablet or smartphone, back them to the Cloud (if available) or transfer them to your computer.

Obviously, there’s a lot of work involved in completing many of these tasks. If you don’t feel comfortable doing them on your own, ask for help and guidance from your financial advisor, accountant, or attorney.


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This article was authored by Dan Flanagan and Jeffrey Briskin. Dan is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or dflanagan@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.


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