Author: Karen Schaeffer, CFP®
Happy New Year!
Quick, before the optimism of the season gives way to the same-old money habits, here are some smart money tips to ensure a prosperous new year.
- Review 2023. The music has stopped on spending for last year. Are you pleased with your choices, or are adjustments in order? Any significant changes coming in 2024? It’s easier to be prepared with a little from each paycheck.
- Practice mindful spending. Take another look at all those subscriptions and re-evaluate their value to your quality of life.
Classify big ticket purchases as either a want or a need and ensure they align with your values and priorities.
- Build in a monthly money moment. Keeping your financial data top of mind helps you be realistic and encouraged about your progress – or able to adjust as life unfolds.
- Evaluate your cash balances. Does the savings account balance need to be replenished or is there too much money in a checking account earning virtually nothing?
- Reduce debt. Don’t worry about a low-interest rate mortgage but do tackle high interest rate debt strategically. Identify outstanding balances and prioritize paying off debts with the highest interest rates first. Consider consolidating loans or negotiating lower interest rates to accelerate the repayment process.
- Increase retirement contributions. Every little bit helps. Until you hit the IRS limits for contributions there is no better investment. Even if you put the maximum in last year, the limits for TSP and IRA account increased by $500/year. That’s roughly $20/per paycheck – you’ve got this!
- Know the RMD rules that apply to you. Anyone over the age of 73 and people who have inherited retirement accounts need to know how much they are required to withdraw or whether they qualify for an exception to the Required Minimum Distribution rules. Failure to comply can result in a 25% penalty. Yikes, seek advice from an expert if you have any doubts about your requirements.
- Double check your investment decisions. For most people keeping money for long term goals in the market and money for short term goals out of the market, is a reasonable first step in allocating money correctly. But with each new year “long term” comes closer to short term. Always good to reaffirm just how much of your money can be invested.
- Check your credit report. If identify theft mischief is happening, the clues are often in your credit report.
Finally, if you’re struggling to implement what you know is a smart money strategy, maybe it’s time to learn more about why humans often make, let’s just say, less than optimal money decisions. “The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness” by Morgan Housel is one of many books on the subject. Your ‘aha’ moment may be just one good book away!
Karen Schaeffer, CFP® is the Managing Member and Co-founder of Schaeffer Financial LLC, a financial consulting firm in suburban Washington, D.C. She has been advising clients for over thirty-five years and has developed a diverse client base including professional women, Foreign Service Officers, foreign nationals, and Federal government employees. She has been presenting seminars for NITP for over 25 years.
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