Making Progress in 2022

For this quarterly newsletter’s main article, I thought I would create a suggestion list of healthy financial tasks to tackle at the start of the year to make sure 2022 is a year that creates positive momentum for your financial well-being.

Create a summary of your financial assets and debts

Some folks like using one of the financial aggregation apps available in the app store, but you can easily do this in an Excel document as well. List all your checking, saving, investment, and retirements accounts. Also list all your debts and make sure to confirm the interest rate on each loan.

Identify the thing you like the most and the thing you like the least

After listing out your assets and debts, spend a bit of time reflecting on the numbers you see. Identify the financial accomplishment you are most proud of and allow yourself to feel good about it. Also identify the item that bothers you the most and then determine what the next small step is to begin fixing that negative problem.

Confirm your 401k/403b/457b contribution rate is what you want

The yearly contribution limit is going up to $20,500 for 2022. If you want to make contributions in 2022, log in to your employer-sponsored retirement account and find the “contributions” section. Make sure the percentage/amount listed is what you want. Also confirm whether you want to make the contributions Traditional (pre-tax) or Roth (post-tax).

Made IRA contributions in the past? Confirm that the money is invested

Unlike 401k/403b/457b accounts which usually have a default investment fund selected for you, most IRAs require you to manually select the fund you want to invest in. I talk with many folks, including a few during the past month, who had Roth IRAs with uninvested cash sitting in them. They made contributions and got the money into their Roth, but the money was never used to actually purchase shares of an investment fund.

Check your beneficiaries

Primarily this applies to retirement accounts and life insurance policies. I regularly meet folks who set up accounts or policies many years ago and the beneficiaries have never been updated. I was talking with a physician who listed his parents as beneficiaries to all his accounts when he first created them. Since that time, he has gotten married and had kids. This has the potential to be a significant and very annoying problem. If he passes away and his parents inherit the assets, the money might not reach his widow and kids. Even if the parents want to gift the money to his widow, this presents several tax challenges.

Get ready for student loans to restart

The COVID student loan pause is scheduled to end at the start of May. Log in to your student loan servicer and confirm your repayment plan is the correct one for your situation. There is no “best plan” for everyone as it depends on income, family size, intended career path, size of loans, etc. Also, determine when you are due for income recertification and make a note in your calendar. If you are unsure about the right plan for you or whether it makes sense to recertify your income earlier than is required of you, talk to an expert with experience and formal training in managing student loans. If you were set up on automatic payment before March of 2020, it is likely that your payment will not automatically restart. You need to log in to your servicer in April and sign up for autopay again. Do not forget about Perkins Loans. These loans are often much smaller and serviced by a different loan servicer, so they are easy to forget about.

Review your insurances

Do you have insurance that you do not need and could stop paying for? Do you have large, life-altering risks that you are not insured against? Is your current insurance policy the best one for your situation? We want to find a healthy balance in the middle of the risk management spectrum where we are not over insured, under-insured, or over-paying for insurance.

Charitable contributions

Many folks make charitable gifts at the end of the year, but it is often easier and better for the charity if you make monthly contributions throughout the year. Decide if there are organizations you want to support and commit to doing so at the start of the year.

Save for large, one-time expenses

If you have a significant expense coming up in the next few years (home purchase, car purchase, big vacation, wedding, taking a few months off from work in between jobs, etc), start saving each month for that eventual purpose. For example, if you think you will have an event in September of 2023 that will cost $10,000, I suggest setting up a savings account named for that topic. Automatically save $500/mo from your checking account to that savings account, so you will have the money ready to be used when the event arrives.

Justin Berry

Author: Justin Berry

Justin is an independent financial planner who believes in building relationships with his clients based on financial education and blunt honesty. His goal with everyone he meets is to reduce their financial stress and help them avoid costly mistakes.

Registered Representative of Cetera Advisor Networks, LLC and Investment Advisor Representative of Cetera Investment Advisers, LLC.

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