10 Money Moves to Start the New Year Right​​

Posted on 12/10/21 by Kimberly Lankford​​

a hundred dollar bill on a calendar with a light on it shining through a keyhole

Andre Rucker

En español

1. If you’re still working, raise your retirement savings ...

Of all tasks related to financial security, one of the most important is to save more for that time when earnings stop coming in. Using tax-favored retirement accounts is a good choice, and you have more time than you might think to bump up your 2021 contributions: Until April 15, 2022, you can deposit as much as $7,000 in earnings into a traditional or Roth IRA. (That’s the standard $6,000 limit, plus a $1,000 catch-up contribution if you’re 50-plus.) It’s easy to open an account online with a brokerage such as Charles Schwab, Fidelity, T. Rowe Price or Vanguard. Once that’s done, you can think about contributing another $7,000 for 2022. ​

2. ... and go automatic.

If you have a 401(k) account available at work and you’re not currently contributing, tell your HR department you’d like to start (or resume) having contributions deducted from each paycheck. Already in a plan? Increase your annual deduction another percentage point or two. For further savings, go through your bank or brokerage to make an automatic monthly contribution to an IRA, an emergency saving fund or another account you’ve created for a onetime need, whether it’s a new furnace or a dream vacation. “Automating your savings is the best way to reach your financial goal,” says Shay Cook, CEO of Crusaders for Change, a financial counseling firm in Odenton, Maryland. “Not having to think about it is key,” she says. “You are more likely to hit your goal than if you have to manually transfer money to the designated account each month.”​

a piggy bank with a security camera and keypad attached to it

Andre Rucker

3. Reassess your budget.

Another golden rule of financial security: Make sure your monthly spending is less than your monthly income. Your needs may be far different than they were before the pandemic. So take an hour or two to review your outlays: Make a list of all your regular bills, such as your mortgage or rent, insurance, cellphone and utilities. Look at a few recent months of credit card and bank statements to see what you’re spending on food, health care and the other expenses in life that are hard to keep track of. “It’s easy for things we don’t value to get added to our budget over time without us realizing it,” says Laura Cuber, a financial adviser in Schaumburg, Illinois. Look for places to cut: small items that add up, recurring charges for services you no longer need, or big changes that could have a major impact, such as moving to a less expensive area.​

​4. Make a home movie.

Just in case we face yet another year of natural disasters, inventory your possessions and review your homeowner’s or renter’s insurance. Use your smartphone to take a video of everything in your home, says Eileen Freiburger, a financial planner in Sebastopol, California. Narrate while taping to give context and to highlight things of value. Open your drawers and closets: “Make sure it’s all there so later you aren’t trying to guess,” she says. Save the file online in case you have to make a claim.​ Separately, verify that you have enough coverage to rebuild your home if it’s destroyed — a problem after the California wildfires, says Kathryn Peyton, a financial adviser in Sonoma County, California. For a good estimate, she recommends asking a builder about local construction costs per square foot for your type of home.​

​5. Consolidate and simplify.

You may have accumulated a variety of retirement accounts from former employers through the years. Track down those accounts and weigh the benefits of consolidating them into one account — an IRA or, if you’re still working, possibly your current 401(k). That makes it easier to track required minimum distributions; you might also save money by switching out of high-fee investments in one account into low-fee funds in another. “I’m a really big proponent of trying to consolidate,” says Michelle Morris, a financial planner with Brio Financial Planning in Quincy, Massachusetts. “Either you do it while you’re still alive, or your heirs will have to find everything.”​


​6. Find tax-smart ways to give.

Doing OK financially? Take advantage of giving strategies that benefit you at tax time. Though you usually need to itemize to deduct charitable contributions, a special rule lets nonitemizers deduct $300 in cash donations (or $600 per couple) in 2021.​

If you are at least 70½, you can also save on taxes by making donations directly from a traditional IRA. See “New Rules for Retirement Accounts” for more details. ​

​7. Eliminate your paper trail.

Gather together all the old financial and medical documents you no longer need to refer to — and which may be piling up so high you can’t find the ones you really do need — and shred them to protect your personal data from prying eyes. A local government or community organization might do it for free; AARP state offices sponsor shredding days. Find one near you at aarp.org/(your state)/shredding. Office-supply chains and shipping stores will shred for a per-pound fee; alternatively, you can buy a crosscut shredder for less than $50. ​

a golden egg with a shield and a helmet in a nest

Andre Rucker

​8. Clear out your flexible spending account.

If you contribute pretax money to a health care flexible spending account at work, you may lose any money you haven’t used by the end of the year. Government rules permit your employer to either give you until March 15 to use your 2021 money or let you carry over up to $550 in unspent account money to 2022; ­COVID-era legislation allows even more flexibility, such as letting you spend the cash on over-the-counter medications, not just prescription drugs. So ask your employer about your account’s current rules and deadlines, and make plans to spend any remaining money — perhaps updating your eyeglasses, buying a blood pressure monitor or getting physical therapy.​​

​​​9. Review your legal paperwork.

Set aside a few hours to reread your will, power of attorney, estate plans and other legal documents to see if they are up to date and still reflect your wishes. “Are they still relevant based on changes in your family, changes in your residency or changes in your net worth?” asks Tim Steffen, director of tax planning at the investment firm Baird. Check with your retirement plan administrator, any firm holding an IRA of yours and your insurance company (if you have life insurance) to be sure those accounts have the correct beneficiary designations, since they regularly determine who receives any money after your death, even if your will says otherwise. ​

​10. Reassess your priorities.

The pandemic has changed many people’s life goals — and financial goals, too. Tim Maurer, a financial planner in Charleston, South Carolina, recommends creating a list of goals you hope to accomplish in 2022, organized in four different categories: relationships, wellness, interests and work. “You’re now ready to apply the financial planning to-do’s that will help you realize your goals,” he says. “When you have clarity regarding what is most important to you in life, your financial decisions can become surprisingly simple.”​

Kimberly Lankford has been a financial journalist for more than 20 years. She was the “Ask Kim” columnist at Kiplinger's Personal Finance, and her articles have also appeared in AARP The Magazine, U.S. News & World Report, The Washington Post, The Boston Globe and other publications. She received the personal finance Best in Business award from the Society of American Business Editors and Writers, and she has written three books.

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