4 ways to end 2021 on a high financial score
At this point in the year, a lot of people are obsessed with the holiday season and the countdown to 2022. If you’re one of them, you might not exactly have questions. financial in mind.
But in reality, the steps you take in the coming weeks could set the stage for a financially healthy 2022. Here are four things worth checking out on your list to end 2021 in a positive place.
1. Boost your emergency fund
We all need money in an emergency, like when your car needs a sudden repair or your manager decides to cut your working hours. Ideally, your emergency fund should have enough cash to cover three to six months of essential bills. If you think your savings might need a boost, now is a great time to put more money in.
Of course, with the vacation expenses piling up, saving money can be a challenge. But if you get some kind of extra cash this month, whether it’s a work premium or your last monthly child tax credit payment, putting that money into your savings is a decision. solid.
2. Pay off certain debts
If you’d rather not start the New Year with a heap of debt hanging over your head, then now is the time to work on reducing some of your balances. Take a look at your credit cards and see what you owe them. If you have a few hundred dollars to spend, paying off the balance with the highest interest rate attached to it is a smart bet.
At the same time, if you are already in debt, do your best not to add to that burden by charging a ton of vacation expenses. If necessary, explain to your loved ones that you need to be lighter on gifts this year to avoid ending the year in a vacuum.
3. Put more money in your retirement plan
Saving more for retirement is not something you will benefit from later in life; it could also lead to a lower tax bill for 2021.
If you participate in a traditional IRA or 401 (k) plan, the money you contribute may be exempt from tax on certain income for that year. For example, if you put $ 5,000 in a 401 (k) plan, the IRS will not tax you $ 5,000 of your income. The same could be true for an IRA if you qualify.
Now, technically, you have until the mid-April tax filing deadline of next year to invest more money in an IRA. But if you want to put more money into your 401 (k), you’ll have to get in motion quickly. This is because 401 (k) contributions are made as a payroll deduction and you will need to give your employer enough time to process this change for it to take effect for the current year. Once January arrives, you will no longer be able to contribute to your 401 (k) for 2021.
4. Take action to improve your credit score
Maybe you want to buy a house in 2022. Or you can buy a new car or a new credit card. Either way, the higher your credit score, the more likely you are to not only be approved for the loan or line of credit you want, but also to get a competitive interest rate in the process.
Take a look at your credit score. If it’s already in the 700s or more, you’re in great shape. If it’s lower, you can take steps to boost your credit score, like checking your credit report for errors (and correcting the ones you spot) and paying off some of your existing credit card debt.
The steps you take in the coming weeks could really set you up for 2022. Try to tick these off your list so you can end the year in a solid place.