At the beginning of each year, we like to remind readers of some important financial housekeeping tasks. Even if your New Year’s resolutions have nothing to do with personal finance, these are key things to consider in January.
Here are a few special notes for this year to help you plan:
1. Right now, the future of federal student loan payments is uncertain. As CNN noted yesterday, the Supreme Court has yet to rule on President Biden’s student loan forgiveness program — and unfortunately, that may not happen until summer. For now, the pandemic pause on payments continues.
2. Earlier this week, Bankrate shared several experts’ 2023 mortgage-rate predictions, which included the following: “Mortgage rates will yo-yo up and down depending on what the latest economic release or Federal Reserve says” and “[M]ortgage rates will likely stabilize below 6 percent across 2023.” Expert tips included (1) this is not the ideal time to refinance, (2) it’s a good time to buy if you can afford to do so, as rental rates are high, and (3) an adjustable rate mortgage (ARM) could be a smart move right now for first-time buyers. Of course, YMMV!
3. Regarding housing prices, GoBankingRates noted yesterday, “If you have been waiting for prices to drop to buy a house, 2023 could be your year,” and also shared that economic uncertainty combined with an increase in unemployment could cause the “largest housing correction in the post-World War II era” (!). Here’s a startling number: Last October’s housing prices were 38% higher than at the start of the pandemic.
4. The current rate for Series I savings bonds is 6.89% (for I bonds issued through April 30, 2023). In case you’re not familiar, these bonds earn interest monthly, and interest is compounded semiannually; you’ll earn both a fixed rate of interest and a rate that changes with inflation. You can redeem your I bond after 12 months (or keep it in there for up to 30 years). If you cash in the bond in less than 5 years, you lose the last 3 months of interest.
5. The best CD rates are currently about 4–5%, as Investopedia shared today. (Here’s some detailed info from the site.) Regarding savings accounts, yesterday CNBC explained something important about 2023: “Don’t assume the interest on your savings account is keeping up with Federal Reserve rate hikes.”
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Personal Finance Tasks to Do ASAP in a New Year
Review 401(k) Limits: The 2023 limit on 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $22,500 — up from $20,500 in 2022 (read more at Kiplinger). If you’re making regular contributions (such as having money taken directly out of your paycheck), make sure you’ve adjusted them accordingly if you want to max out your 401(k). It’s best to do this at the beginning of the year so you only have to do it once — if you do it in the middle of the year you’re either not maxing it out or you’ll have to change your contribution again next January.
{related: where to save (when you don’t know what you’re saving for)}
Review IRA Limits: Until last year, IRA limits had remained the same since 2019, but inflation has led to an increase for 2023, as Kiplinger noted. The new limit for annual contributions is $6,500, up from $6,000, and for people 50 and older, $7,500.
Reassess your debt: If your mortgage or (private) student loan payments changed recently, figure out how you can round the required amount UP to an even number, and make the change accordingly (paying the extra toward principal). Do what you can — every little bit helps with principal (this calculator from Bankrate helps you see how much), and knowing that a memorable round number is coming out of your bank account helps you to know if your balance is sufficient.
{related: how to decide when to pay down debt — and when to save}
For example, if your mortgage payment is now $3,218, you could pay
- an extra $282 toward principal each month (total = $3,500 each month)
- an extra $82 toward principal each month (total = $3,300 each month)
- an extra $782 toward principal each month (total = $4,000 each month)
- or an extra $32 toward principal each month (total = $3,250 each month)
If you have a 529 plan (or several), reassess your automatic contributions. Each state occasionally changes the amount you can give to get a state income tax deduction; if you want to max it out, then assess.
{related: the 411 on using 529s to go back to school}
{related: not sure what to do first/next in your personal finance journey? here’s our money roadmap}
Reassess your subscriptions and other repeating payments to make sure you’re not paying money for services you’re not using. (Related: This year, Netflix will start cracking down on password sharing, as CNET recently reported.)
Automate what you can: Consider setting up automatic investing, or automatic saving to amortize big expenses. Kat has a small amount of money automatically moved from checking to her online savings accounts to help her save for multiple financial goals, like her emergency fund, vacation fund and predictable large bills (term insurance, accounting advice, etc).
What personal finance tasks would YOU do ASAP in a new year, readers? What have you done already this year; what has this list inspired you to do?
{related: what was the best financial decision you made last year? (2018 discussion)}
Stock photo via 123rf.com/serezniy.
Kate Antoniades
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