Want to stay out of debt, stick to your budget and lower your chances of owing more taxes? There are some key financial moves to make now that will help get you there in the year ahead. Making these financial decisions before the end of the year can help set you up for financial success in 2023.
- Make sure you didn’t pay too little tax on 2022 income - No one wants to end up paying interest and penalties or a big tax bill next year because of not having enough tax taken out of pay this year. The IRS says one way to see if you’re on track to pay the right amount of income tax is to pay the same amount as you did in 2021. You can also do a “paycheck checkup” by using the Tax Withholding Estimator on the IRS’ website to review how much tax is withheld from your pay.
- Increase your 401(k) plan contributions - You’re allowed to contribute up to $20-thousand 500 ($20,500) to a 401(k) plan in 2022, or up to $27-thousand if you’re 50 or older. Many financial advisors say if you can’t afford to contribute the maximum, at least put in enough to get your employer’s matching contribution, if you have that option.
- Boost your emergency savings - Everyone needs an emergency fund to cover unexpected expenses, but research shows that many of us don’t. If you already have one, adding more to it is advisable and if you don’t, there’s no time like the present to start an emergency fund.
- Plan how you’ll spend before you buy - Can’t afford to save more money right now? At least make sure you don’t overspend. Decide how you’ll pay for holiday purchases before you buy them and remember that using cash instead of credit cards can help you stay on budget and out of debt. Some vendors will even charge you less for paying with cash so they avoid credit card transaction fees.
- Think about how you’ll give to charity this year and next - Lots of people give year-end donations that charities depend on and getting a tax break shouldn’t be your only motivation to donate. One way to make sure you give back more regularly is to add charitable donations to your overall budget, according to a recent Vanguard survey that finds those who do this gave four times as much as those who didn’t over the next 12 months.