Embrace the allure of a fresh start with the new year. It's a great time to commit to your money goals, budget better, pay down debt, ditch bad habits and improve your financial picture to reach your goals. If you want 2022 to be a better year for your money, consider making these financial New Year’s resolutions.
This may feel like a chore, but it’s a smart financial chore to do, says Siyu Wang, a behavioral economist at the Institute for the Study of Economic Growth at Wichita State University.
"You may want to reconsider your insurance choices at the beginning of each year, especially 2022. With so much uncertainty, do you want to pay more for your health deductible?" Wang says.
Aside from evaluating your health insurance choices during open enrollment, take a good look at your homeowners insurance or car insurance. Have you had those policies forever? Maybe you're paying too much. You also may want to buy some insurance.
"Do you and your family have life insurance? Have the beneficiaries been set up appropriately?" Wang asks. "These scenarios may seem far away, but it is always better being prepared.”
Especially if you’re in your 30s or older with a large amount of debt, coming up with a plan to reduce what you owe is really important, even if you have to make some financial sacrifices to do it.
"If you cannot reduce your debt to zero, try to minimize the balance. In order to enjoy your financial freedom, it is important that you have control over how much money you owe, no matter what the purpose of the debt is,” says Ganesh Pandit, an associate professor of accounting at the Robert B. Willumstad School of Business at Adelphi University in New York.
“Remember, in the end, you want to wake up each day knowing that you have control over your financial situation and hence over your life,” Pandit says.
If refinancing is on your agenda, this shouldn't be left until 2023.
“If you have a house and have not refinanced yet, what are you waiting for?” asks Stacy Mastrolia, associate professor of accounting at Bucknell University's Freeman College of Management in Lewisburg, Pennsylvania.
“For years, interest rates have been the lowest in history, but there are signs – specifically increasing inflation – that interest rates are likely to rise in the near term. The opportunity to lock in today’s historically low rates for most people’s largest monthly payment and largest asset may be coming to an end,” she says.
As college tuition costs rise, it's especially important to save early with a 529 plan, a college savings account that's exempt from federal taxes.
“While 529 college savings plans have been in existence since 1996, they are still not extensively used by families,” Mastrolia says. “Of families that are saving for their children’s college expenses, only 30% of savings are in tax-advantaged 529 accounts.” She points out that 529 plans offer federal tax-free growth if the account is used for qualified education expenses, and that could include not just college but tuition for private school as well.
(Partially reprinted from money.usnews.com)
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