I have never been one to have a New Year’s resolution. I never felt the need because statistics show that 80% of New Year’s resolutions fail by mid-February, according to a 2020 report on www.wbay.com. I am one to certainly make goals, but I have never referred to them as resolutions. Perhaps the nation could make New Year’s resolutions as we had quite the year in 2021.
The year was filled with both positives and negatives, and hopefully we can hang tight to the positives of 2021 and get rid of the negatives. One way to ensure that 2022 is a positive one is to take the following five financial actions.
Max Out Your 401(k), Roth IRA or Traditional IRA
The first step is to make sure you have contributed the maximum to your retirement accounts. The IRS allows for up to $6,000 to be contributed to your traditional IRA and ROTH each year and an additional $1,000 if you are over 50 for catch-up contributions. If you are self-employed and have a SEP, you can contribute up to $61,000 in 2022.
One overlooked item when it comes to retirement accounts is whether or not to max out your 401(k). Most people select a contribution percentage and don’t consider if they are maxing it out or not. For 2021, 401(k) maximum contributions are $19,500. Be sure to check with your HR department to see how much your total contributions are and whether you have room to add more. It’s also important to note that you have until April 15, 2022, to contribute for the 2021 tax year.
Get your taxes done, ASAP! Believe it or not, I’m still waiting for my 2020 tax return, and I have a suspicion that many of you are waiting as well. This is not uncommon. The IRS is very understaffed now, and the problems created from COVID-19 aren’t helping. That does not mean, however, that you should wait to complete your taxes. Many of you have received your refund, and if you are entitled to a refund this year, you should get that as quickly as possible. Getting your taxes done quickly also enables you to complete the first goal of max out your retirement plan. The sooner you get your taxes done, the sooner you know if you max out your plan.
Focus on Your Health
COVID-19 is something familiar to all of us at this point. We have faced hardships — business closings, family illness, canceled trips, rerouted life plans, the list goes on. It is clear that COVID isn’t going away, as we face new variants and mandates that alter our daily lives.
Last year was a time to catch up on our losses from the global changes resulting from the initial 2020 COVID outbreak, which means 2022 is a year to focus on your own health. The dust has settled, and I am sure that most of us have adjusted our personal, professional and social lives to the new norms caused by COVID. Focus on your physical and mental health this year and give yourself a break here and there.
We have all been through a lot — COVID hardship looked different for everyone — as this pandemic was something not in anyone’s playbook. Don’t forget to focus on your health and wellbeing this year, cut out time for family, and give yourself the breaks you need.
Create Reasonable, Attainable Goals for the Year
I have always said that success is the point where preparation and opportunity meet. January is the opportunity to prepare for your own success. That starts with defining what success looks like for you. To do that we need to create goals.
Goals should be both short-term and long-term. I am a big believer in writing down your goals. I am also a big believer in writing strategies on how to attain those goals. Goals should be both financial and non-financial. Your financial goals should be to check on whether you are on pace to retire, buy your first house, etc.
Establishing a game plan around paying off debt is another great example of a great goal. Creating goals is just the beginning. Having a plan around keeping yourself accountable is important. Eighty percent of New Year’s resolutions fail because most of us stop keeping ourselves accountable. Don’t let that happen when you are trying to pursue your goals.
Find a mentor or hire an advisor
Tom Brady is my favorite athlete. I know I may have just lost many of you reading this as he is hated around these parts, but he is a great example of why it’s important to hire or look for help. He has been to 10 Super Bowls, won seven of them, and he is constantly looking for ways to improve. Think about that!
He is at the pinnacle of his profession, and he looks to coaches and other players for ways to improve. He has a health “guru” who never really leaves his side to help him keep his body in shape and it is clearly working. He is 44 and still at the top of his game. I encourage all of you to find a mentor to help you with your career or life decisions.
Hire an advisor to help with your financial goals (I happen to know a great advisor if you need any assistance there). Mentors and advisors are there not only to help you pursue the moves and goals I talked about above, but they are also there to keep you accountable. Do you want to be among the 80% of people who don’t achieve their New Year’s resolutions? I know I don’t!
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