As we come to the end of another year, it is crucial that we take a few smart money decisions to ensure that we start 2022 on the right note. The pandemic may have set you back financially over the past year or so. Taking the right steps towards ensuring your financial betterment is important for 2022. Here are a few things you should consider doing.
Reduce your tax obligations
The first of the many smart money decisions you should take this year is to avoid paying unnecessary taxes. Take it from us, it is a smart money decision. The actions you take during the year will determine how much tax you have to pay in April. Some of these include paying bills for deductible expenses in advance and selling off investments that don’t have much value now. These can reduce the total amount of tax you will otherwise have to pay. If you invest in a mutual fund, check whether the fund is paying the capital gains on distribution. Otherwise, you will have to bear the tax burden.
Also, look at maximizing your contributions towards retirement savings. These are tax-deductible expenses and help in reducing your overall tax payable. If you donate to charity, make sure you claim them as deductions as well.
Restructure your stocks
Your stock investments must always be in line with your investment goals. Especially given the topsy-turvy year we have had so far it is vital that your stocks are earning you money. Take a look at your portfolio and see if your stocks are where you want them to be. If not, you may have to rebalance your stocks so that your overall risk is low.
You will also have to look at what the forecasted returns are expected to be in the coming months. Restructuring your stock market portfolio at the end of a year can give you a better chance at making higher returns in the next year. It’s a smart money decision to keep your stocks in check.
Review retirement savings
There are limits to how much you can contribute to your retirement savings accounts every year. At present, these limits for 401(k) contributions are $19,500 per year if you’re below the age of 50 years. For people 50 years old or more, this limit is $26,000. If you’re contributing towards an IRA, the limits for the same age groups are $6,000 and $7,000.
Try and contribute the maximum possible amounts to these accounts every year. The best part is that many employers offer to contribute matching amounts to the extent you put in. This is literally free money you’re getting, so don’t let it go.
Claim your credit card rewards
Using credit cards recklessly can ruin your credit and put you in a ton of debt. But use them wisely and you stand to gain quite a lot especially some pretty good rewards. Most credit cards are designed to offer at least one type of reward, and in some cases, even a whole range of them.
But remember that your rewards usually come with expiry dates. If you don’t use them within these dates, they will expire. Maximizing and claiming your credit card rewards can help you save a lot of money. As the year draws to a close, check your credit card accounts to see if you have any unclaimed rewards that are expiring soon.
Check employee health benefits
Smart money decisions also include keeping tabs on your health savings accounts and your flexible spending accounts before the year ends. You can lose funds you don’t spend when it comes to FSAs. So spend this amount by buying eligible products or scheduling doctors’ appointments before the amount expires. Meanwhile, here’s our year-end financial checklist for you to go through and tick off. Also read, how 2022 can be your best financial year yet.