Investing is just one spoke in the wheel
As we kick off the New Year, let’s start by making sure we have a few key pieces of our financial health in order:
Budgeting:
- Whether you’re planning short term for an upcoming vacation or home project, or long term for college or your retirement, knowing your budget is paramount. Now is a great time to revisit last year’s numbers. See what worked and what did not. Most importantly, don’t beat yourself up. Budgeting is like working out: consistency over long periods of time is what produces results. If you fell off the horse, now is the time to climb back on.
- There are many free programs on the web available to help. None are perfect. Go with what works best for you. You can always default to an excel spreadsheet. Try here: NerdWallet Suggestions.
- By this time next year, try to have a handle on what money came in and what went out.
Savings Tips:
- If you can, max out your Roth IRA early in the year. Markets are more often higher at the end of the year than at the beginning. You may take advantage of compound interest early.
- Catch-up rules for 401k’s have changed. Readjust 401k contributions based on turning age 50 or ages 60-63 (eligible for “super catch-up”).
- Make sure you’re taking full advantage of a Roth 401k, based on your specific income level of course.
- If your employer offers the “After-Tax Contribution Feature” – different from the normal Roth feature – call us. That’s a huge opportunity to fund Roth Dollars over and above the normal 401k limits.
- While inflation has been tough, a silver lining is higher savings interest rates. The days of earning 0.01% on your savings are over (for now). Make sure any cash not in your checking account is in some sort of high yield savings. Here are some examples from popular online offerings, as of 1/15/25:
Ally Bank: 3.80%
Capital One 360 Performance Savings: 3.80%
Citizens Access: 3.70%
Marcus by Goldman Sachs: 3.90%
Debit Card/Credit Cards:
- We cannot stress enough: debit cards are not ideal for daily expenses/swiping at stores. That card should be the cleanest card in your wallet. Only use it at ATMs. You leave yourself open to theft otherwise.
- Find a credit card with a limit you’re comfortable with and will not abuse.
- Many cards offer high cash back rates, perks for flights, overall travel etc. Find a card with benefits that are unique to you. For example, if you fly often from Boston to Florida via Jet Blue, you may want a Jet Blue Credit Card to earn free flights in the future.
- Remember that many credit cards have annual membership fees.
- Whichever you choose, all monthly eligible expenses should be paid with this card. Then pay it off immediately when the monthly bill is due.
- If you’re able to stay disciplined with that approach, you’ll avoid interest and penalties and start racking up cash back and points.
As always, call us with questions regarding these tips. All are important and all can improve your financial health. To steal a quote from Bill’s high school principal, “The choices we make today shape our world tomorrow”. Let’s start banking some credit card points!
Cheers,
Your Team at Great Oak