The start of a new year is a great time to brush up on some good habits and start working toward new goals. Financial goals — like saving money — are commonly found on resolution lists, so to help you start 2023 off on the right foot, we’ve put together a few financial items to check in on. Here are five ways to improve your finances in January.
Set short- and long-term goals
Put some thought into what you’re hoping to accomplish this year — and think a bit about where you want to be in the future. Your life goals drive your financial plan. Start with some short-term personal goals for the year — like finally seeing family that you’ve been apart from for too long. Then, work your way out to the more distant future with long-term goals — such as buying a second property or retiring at age 60.
Although some goals may feel out of reach today, putting some forethought into what you need to do to get there will make them attainable in the future. For example, if you’re hoping to buy a new home, you could start working to save for a down payment or determining what steps you need to take to buy your dream home in the current market.
Firm up a financial plan
A good financial plan helps you reach your life goals (in the future, but also today). When you know you have a financial plan to help you achieve future goals, you can feel more confident about spending today — perhaps on that trip to go see your family.
If you already have a plan, the beginning of the year is a great time to review the different aspects of your financial plan — from retirement savings to life insurance. Life evolves over time and your plan should, too.
Cultivate good credit
Making sure you have a handle on any debt is an important step in building a good credit score. If you overspent a little bit last year and took on some debt, make a plan to get your debt back under control this year.
Making regular payments is a critical factor in establishing your credit score, but there are also other factors that affect your credit score. Generally speaking, lenders are interested in seeing that you can manage a variety of credit accounts and loans for long periods of time.
It’s good to be aware of these factors and keep them in mind when making decisions about your credit — like whether to cancel a credit card you’ve had for a long time or take out an automotive loan. You may also want to take an additional step to protect yourself by freezing your credit.
Consider an IRA
Retirement is likely one of the long-term goals on your list. There are many ways to save for retirement, but if you haven’t considered an individual retirement account, or IRA, now can be a great time to contribute to one. Any contributions you make from January through tax day will still give you a break on your 2022 taxes.
There are two different types of IRAs you can typically open: a traditional IRA and a Roth IRA. With a traditional IRA, you contribute money pre-tax (giving you a tax break today) and the money is taxed when you withdraw it in retirement. With a Roth IRA, you pay taxes on the money when you contribute and can generally withdraw it tax-free in retirement. There are benefits to both types of IRA accounts, so this can be a good topic to cover with a financial advisor.
Get a head start on tax prep
While you may have until April 18 (you get a few extra days this year) to file your taxes, getting your thoughts in order now means you won’t be scrambling at the last minute. Forms like 1099s or W2s should start arriving in January and February. If you use a tax preparer, getting on his or her calendar now can give you your choice of appointment times and allow plenty of time to track down documents you may have forgotten to include. You can also use this time to read up on any changes to tax regulation or limit increases that could impact your return.