On the first day of Christmas my true love sent to me: 12 money tips from the team at Life Compass Financial. Okay, that may not be quite as the traditional Christmas carol goes, but for this Christmas season, our team would like to share with you 12 money tips you can use to prepare your finances for year-end and set yourself on the right foot for the year ahead.
1.) Maintain an Emergency Fund
An emergency fund is an account for you to set aside money to be used for times when “life happens.” How much you keep in your emergency fund will depend on a few factors. We’d recommend you keep anywhere from 3-12 months’ worth of expenses in your emergency fund. If you own a business, have a fluctuating income, or are looking to change jobs, then it may make sense to keep closer to a year’s worth of expenses in your emergency fund.
2.) Pay Off High-Interest Debt
Not all debt is the same. Consumer debt – like credit cards, payday loans, and personal loans – come with a high-interest rate that can be very costly over time. If you’re looking to pay off high-interest debt, you may want to use a strategy such as the snowball or avalanche method. These strategies can help you pay off high-interest debt sooner, keeping more money in your wallet.
3.) Review Your Retirement Savings Plan
Take some time to review your current retirement savings plan to see if any adjustments need to be made. A few items to review are your contribution percentage, the type of account(s) you’re contributing to, and the asset mix of your investments.
4.) Review Your Estate Plan
During the end of the year, it is a good time to review your estate planning documents and make any necessary adjustments for major life events, such as marriage, death, or divorce. If you haven’t completed your estate plan, the beginning of the year is a good time to make it a priority. While reviewing your estate plans, take some time to double-check your beneficiaries on items such as your 401(k), life insurance policies, and IRAs to make sure they are up to date.
5.) Double Check Your Insurance Coverage
Look over your current insurance coverage to make sure you’ve properly covered the risks in your life. With the rise in the cost of insurance, it can also be a great time to review your coverage and potentially look for cost savings by bundling your policies or paying your premiums annually.
6.) Revisit Your Cash Management
The rise in interest rates has created an opportunity to earn a higher yield on your short-term money. Take some time to review what return you’re earning on your short-term money to see if there’s an opportunity to earn a better yield on short-term investments such as a high-yield savings account, Money Market Fund, or Treasury Bills.
7.) Include a Health Savings Account in Your Healthcare Plans
A Health Savings Account can be a great tool to help you plan for future healthcare expenses. Those with a high deductible healthcare plan may be eligible to use a health savings account. This type of account allows you to contribute pre-tax funds to it and then have those funds invested tax-deferred and can be withdrawn/used tax-free for qualified medical expenses. Known as, “triple tax advantage.”
8.) Put Together an Up-to-date Budget or Reverse Budget
The end of the year calls for a time for us to reflect. By reflecting on your spending, you can review if you spent your money on things you valued or if you should make adjustments for the year ahead. The goal of a budget is not to restrict you but to create awareness around your cash flow. If the idea of a budget doesn’t excite you, you could try reverse budgeting. This is where you put your saving/investing goals first before your spending, making it a priority to pay yourself first.
9.) Utilize a College Savings Vehicle
Plan for your children’s college by utilizing a college savings vehicle called a 529 plan. This type of account is specifically designed to help you save money on taxes while saving for your child’s or grandchild’s college expenses. The money you contribute to the account can be invested and grow tax-deferred with the potential to be used tax-free on qualified education expenses.
10.) Set Goals for 2024
You may want to consider incorporating money goals into your New Year’s resolutions this year. These goals can vary from using a list at the grocery to reduce spending, increasing your retirement contributions by a certain percentage, or starting that new business venture you’ve been dreaming of. Whatever it is that your goals may be, share them with your support system to help hold you accountable.
11.) Proactively Tax Plan
Tax time is not just once a year. Taxes play a role in your finances throughout the entire year. Proactively planning around your taxes can help you save on your tax liability over your lifetime.
12.) Invest in Yourself
This holiday season find a way to invest in yourself. This could be signing up for a gym membership, learning a new hobby, or volunteering at an organization you’re passionate about. Ultimately, an investment in yourself is one of the best investments you can make.
From our team to yours, we want to wish you a Merry Christmas and Happy Holidays!
-by Jacob Young, AAMS®
Financial Advisor, RJFS
313 East 10th Ave.
Bowling Green, KY 42101
Phone: 270-846-2656
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
Ben Smith Life Compass Financial is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
