New Year’s resolutions can be challenging. About 35% of people in the USA stuck to their resolutions for 2021, which is great, but that means 65% of us let some or all of our resolutions drop. Of all the New Year’s resolutions made in 2021, 44% related to saving money. As we head into 2022, here are some resolutions related to your money that are relatively easy to keep, especially if you start now:
- Don’t over or underpay your taxes. A common source of tax overpayments is married individuals continuing to mark themselves as single on their tax withholding forms at work. When you get married, it’s entirely up to you to update your status with your payroll processor or HR. If you have any taxable payments, such as annuity distributions, social security, or IRA withdrawals with a set tax withholding amount, make sure your withholding settings reflect your effective tax rate and not just the marginal tax bracket you are in. For example, a joint-filing married couple withdrawing $60,000 from IRAs (with no other taxable income) is in the 12% tax bracket but their effective tax rate is only 6.3%. Underpayments tend to come from inversion of the above scenarios: make sure you aren’t withholding too little at work or from other income sources, and, if you have income from which withholding is not possible, be prepared to make estimated tax payments.
- Bump up your retirement contributions. If you are maxing out your 401(k), 403(b), 457, or TSP note that the maximum is now $20,500 (plus a $6,500 catch up if over 50). SIMPLE IRAs have been bumped up to $14,000 with a $3,000 catch up. Of course, not everyone is in a position to max out their retirement plans. In that case, why not bump up your contributions by just 1% for the new year? Over time it can have a big impact.
- Keep your credit card companies abreast of your income. If you choose to use a credit card, bear in mind that a higher credit limit, even if you never intend to max out your credit cards, can improve your credit score. This is because lenders like to see a low ratio of balance to credit limit. Paying your balance down or off is an excellent way to achieve this but it doesn’t hurt to have a higher limit, not so you can spend more, but in order to optimize your credit rating. On occasion, some lenders will invite you to update your income, but if yours doesn’t, or hasn’t asked in a while, it’s easy to update it online in your credit card’s app or website. While they won’t automatically raise your limit, this information will be used when they periodically reevaluate your limit. If you’ve received a raise, promotion, or other pay increase it’s a good idea to let your lenders know.
- Cancel unused or little used subscriptions. Take some time this month to analyze which subscriptions (be it your local paper, Netflix, or a food delivery service) you actually use regularly enough to warrant keeping. Since we don’t have to sit down and pay for each individual month, simple inaction is enough for these to pile up!
- Don’t miss an opportunity to make retirement contributions for last year. You have until April 15th to make prior year (2021) contributions to your IRA or Roth IRA. If you had planned on putting money aside last year but never got around to it, there’s still time.