Wrapping Up 2023: Your Personal Finance To-Do List12/8/2023
With 2023 winding down, it's time to take a step back and evaluate your finances.
It's a perfect opportunity to find areas for improvement, whether it's cost-cutting or boosting your savings. But fear not, this doesn’t have to be a daunting task. Let’s explore three key financial areas to focus on as we prepare to welcome 2024.
Credit Card Overhaul
Credit card debt in America has surged, reaching a staggering $930 billion as of late 2022. With rising interest rates, it’s crucial to reassess your credit card usage.
Check Interest Rates
Keep tabs on the interest rates of your credit cards. These rates determine how much extra you'll pay when you carry a balance. Make a habit of reviewing your credit card statements or online accounts to stay aware of interest rate changes. If you have multiple cards, compare the rates to identify which card is costing you the most in interest.
Negotiate Lower Rates
If you have a good credit history, you're in a strong position to negotiate a lower interest rate. Reach out to your credit card issuer and inquire about reducing your current rate. This is more feasible than many realize. A lower interest rate reduces the amount of interest you accumulate, making it easier to pay down your balance.
Balance Transfer Offers
Look for credit cards that offer a 0% introductory rate for balance transfers. This provides a chance to pay down your balance without accruing extra interest. However, be mindful of balance transfer fees. It’s important to calculate whether the fee is worth the potential interest savings.
Close Redundant Cards
Annual fees on unused cards can drain your wallet. Check each card's benefits and ditch those that don't align with your lifestyle. Remember that closing a credit card might affect your credit score. So think twice if you're planning to apply for loans any time soon.
Budget Deep Dive
Even if you don’t maintain a strict monthly budget, year-end is a time to scrutinize your spending habits.
Cut Back on Subscriptions
Review your bank statements to identify and cancel seldom-used subscriptions. Negotiating better terms on essential subscriptions can also help save money.
Emergency Fund Check
The old advice of having six months of expenses saved seems daunting. Start small, as even $250 in savings provides significant financial security. Aim to save a regular part of your budget. For example, you can use automated transfers to your savings account.
Investment Health Check
This year has been challenging for investments, particularly the S&P 500. It's crucial to take a strategic approach to your investment portfolio.
Maximize Retirement Contributions
If you haven’t maxed out your 401(k) contributions for the year, consider increasing your investments. For 2022, the limit was $20,500, and it has risen to $22,500 for 2023. Maximizing your retirement contributions boosts your savings and provides current tax benefits. Contributions to traditional 401(k) plans are pre-tax, lowering your taxable income for the year.
If you’re aged 50+, don’t forget about catch-up contributions. You’re allowed to contribute an extra amount (in 2023, this is $7,500) to your 401(k), accelerating your retirement savings.
Explore Alternative Investments
Diversifying your investment portfolio with natural resources and real estate protects against inflation and economic downturns. Real estate investments provide a steady income stream through rent, while appreciating in value over time. Investing in timber, agriculture, or precious metals also serves as a hedge against inflation.
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