Now that the new year has begun, it’s a good time to examine your financial situation and find ways to improve it, with the focus on meeting your long-term wealth objectives. Here are 7 ways to ensure that your financial ducks are in order.
1. Refinance Your Student Loans
Student loans are a problem for a significant number of Americans. Indeed, the amount in student loans owed to creditors and lenders stands at $1.5 billion! If you count yourself as one of them, there are a couple of approaches you can take in terms of refinancing. If you have the ability to pay your loans back quicker, then do so. It will save you on total interest costs down the road. On the other hand, if you’re struggling financially, you can also opt to extend your loan for a longer term. The downside, of course, is that you’ll end up paying more overall. But it does allow you to free up cash to cover important expenses or meet other debt obligations. Online platforms such as LendKey let you compare terms and rates from different lenders. On the other hand, be aware that changing the terms of your student debt could disqualify you from certain government debt forgiveness programs. So be informed before you make any changes.
2. Readjust Your Portfolio
If you’re looking for steady growth in your 401K and other investment accounts, taking the safe route by choosing conservative, tried and true stocks and bonds isn’t necessarily a bad idea. However, in recent years investors who have put their money into more risky, aggressive accounts have seen their wealth grow at a much greater rate. This is why it is important to meet with your financial advisor and adjust your portfolio with a focus on both high and low-risk investments, bonds, and equities.
3. Review Your Credit Report And Score
The three major credit bureaus — TransUnion, Equifax, and Experian — usually charge for the ability to see your credit scores. However, they are required by law to give you one freebee each year. In addition, if you own a Capital One or Discover credit card, you are allowed unlimited credit reports. Having a good credit score allows you to take out loans at the best interest rates, so it is important to make sure you are monitoring it for errors or even identity theft.
4. Claim A Business Income Deduction
If you are a business owner and have yourself a savvy accountant, there are lots of expenses that can be written off as a tax deduction. This can include the miles you put on your car for work-related activities, travel expenses, and even phone/internet use. In fact, you can even write off half 50% of your food and drink purchases under certain conditions! Perhaps the best tax deduction out there is the Qualified Business Income Deduction in which you can write off as much as 20% of your business income! This is where having a good tax professional comes in handy, since navigating through the law can be a very complicated process. But if you are in fact eligible, you’ll end up with a lot of extra money in your pocket!
5. Shop For New Insurance
Even within an individual state, the amount you pay for insurance can vary greatly depending on which agency you use. While renewing the same policy every year is the most convenient thing to do, you are probably missing out on opportunities to save money. It is important to shop around for cheaper auto, homeowner, and life insurance policies from time to time. Just make sure you have a new plan ready to go before you cancel your old coverage.
6. Reassess And Negotiate Monthly Bills
The most obvious way to save money is by trimming your monthly bills. Discussing your options with your cable, internet, or mobile phone provider presents a great opportunity to reduce your expenses. Why? Because it’s a competitive market out there, and they would rather offer you a better deal than lose you as a customer. Even the mere suggestion that you are thinking about switching providers is enough for companies to provide you with discounts in exchange for staying with them.
7. Plan Charitable Donations Wisely
In 2022 the standard tax deduction for married couples filing jointly is $25,900. This is up from $12,000 just 5 years earlier. As a result, a lot of people don’t feel the need to itemize their deductions. However, they often don’t realize that charitable donations can only be written off if those donations are itemized. It is also important to think strategically when giving. For instance, if you’re just below the threshold, it is a good idea to bunch your donations. Another idea is to donate in December rather than January, so you can benefit in the upcoming year rather than the one that follows. Note that you are typically only allowed to itemize donations of up to 60% of your adjusted gross income.