2022 is here. The time is good enough to evaluate your financial planning to make sure your portfolio and other financial measures are ready for the challenges of the year ahead and beyond.
The financial market may be faced with turmoil at any given point of time. Your plans (financial plans) for the year ahead must be able to insulate you from any financial emergency or other unforeseen mishaps.
What financial planning tips to go for in 2022?
Here’s a close look at 10 unique financial planning tips to protect you both in the hour of need and also your retirement years.
Consider buying insurance:
While there can be a tendency to overlook insurance, for many investors, disability and life insurance are important components of an overall financial plan – particularly when it comes to providing peace of mind. The ability to bring in income is crucial to providing for one’s family and oneself and insurance can offer a solution if that ability is interrupted at any point.
Work with a budget:
Even individuals who are cautious about their spending can be helped by the discipline instilled by working from a budget. Without a budget, it’s easy to let spur-of-the-moment purchases lure you into spending more than might be prudent. A budget provides an excellent means of calculating how much you are spending on what and adjusting your spending behavior going forward.
In the current era of inflated lifestyles and instant gratification based on the indiscriminate use of credit cards and " pay later " apps, it is possible to spend your money randomly. There is a budgeting rule that can help you regain control of your derailed finances; the 50/30/20 budgeting rule.
This 50/20/30 budget rule helps you understand where your money went and what it was spent on. 50 percent of your income is allocated for your needs which you must pay in order to survive. 30 percent are for wants, which are any purchases you make that are not absolutely necessary. Rest 20% for savings and investments.
Treat yourself with gift cards:
Trying to stop yourself from spending money on any of the small things you enjoy in the name of financial prudence. It can be counterproductive – in the long run, it may make the budgeting process so unpleasant that it becomes hard to stick to it.
Instead of eschewing all non-essential purchases, allow yourself to splurge on things you enjoy every now and then – from books to a movie to ice cream to a deluxe latte or whatever it may be – by using gift cards.
Prepaying for the cards allows you to keep such spending from breaking the budget while still getting the chance to experience the pleasure of buying things you enjoy!
Budget for living on one income:
If you’re planning to have a child and wondering if one parent can quit work or reduce their hours when this occurs, draw up a budget to see if this is feasible. Doing so may require that you increase your savings in the year or two leading up to having a child to make it easier for one spouse to scale back on work when the child arrives.
Establish a 529 plan for college savings:
These plans allow funds to grow tax-deferred if they are subsequently used for a college education. Cash gifts from relatives can also be used to help fund the accounts.
Review your portfolio allocation:
Your investment goals and risk tolerance are likely to change over time. As a result, it makes sense to review the investment selections you have made regularly to affirm that they accurately reflect your current circumstances. This allows you to be proactive when it comes to managing your investment portfolio.
Maximize retirement savings for both partners:
If one spouse is not working, a spousal IRA can be used to set aside retirement savings for the non-working spouse. Doing so allows you to maximize the number of funds set aside for retirement purposes in any one year.
Did you know seniors are exempted from certain taxes?
Keeping a tab on the old age facilities provided by your government forms a crucial part of your financial planning. Tax exemptions are one of the most important drives taken by our government.
For instance, a senior citizen or a disabled person is exempted from electricity bills and also other utility bills under the Utility User’s Tax Exemption.
Make sure beneficiary forms are current:
In retirement plans and insurance contracts relating to annuities and life insurance, beneficiary forms take the place of a will or trust when it comes to determining who will inherit assets. As a result, you should ensure that these forms are completed and updated as necessary to reflect any changes that need to be made to them over time.
Review your employer’s benefits plan:
Benefits plans sponsored by employers can cover a wide variety of financial issues, from retirement savings to a disability, life and health insurance, and more. As such, it is important that you take the time to review your plan. For instance, if your employer matches 401k contributions, it increases the incentive on your part to participate in the plan!
A 401(k) plan sponsored by an employer can accept up to $20,500 in contributions in 2022. However, many are not happy with the $1000 increase, compared to 2020 and 2021, when almost half of the companies will or have increased wages by more than 3% in 2022, according to Payscale's Compensation Best Practices Report (CBPR).
Did you know? Apple is one of the top employers providing the best 401k company match contributions for employees. For the first two years of service, Apple will match 50% of the first 6% of eligible pay put into the plan. The match rises to 75% for employees with two to five years of service and 100% for those with more than five years.
Automating all/most of your payments is one good idea
Automating bill and other payments not only saves both time and energy, but also documents all your expenses in a systematic approach. It leaves you with adequate time to concentrate in other core activities that could be your business planning or other essential work.
Hope these financial planning tips help you manage your finance better. Looking for more advice? Contact now and schedule your free Financial Planning Session with certified financial planner Los Angeles Samuel Rad.