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Regardless of circumstances, January is prime time to seek financial health

Kathryn McNutt - The Journal Record

Jan 3, 2023

The new year is a good time to take stock in your financial situation no matter where you are in life.

The new year is a good time to take stock in your financial situation no matter where you are in life, experts agree. Big earners, entry-level employees, first-time parents and workers nearing retirement all may benefit from making some adjustments for 2023.

“It’s good to use any time off to think about financial things I need to change for the coming year,” said Josh Mullins, CPA and partner at Oklahoma accounting firm Arledge.

Talk to a financial adviser, attorney or CPA if necessary or simply review your records. “It’s a good time of year to get organized,” Mullins said. “It will be a relief.”

You can start by getting your tax records together to avoid a last-minute rush to the deadline. Make a spreadsheet of charitable contributions and get electronic forms of brokerage accounts, Mullins said.

If you experienced any life changes – marriage, divorce, birth of a child – correct the tax withholdings from your paycheck for the coming year and update the beneficiaries for your life and health insurance, he said.

Also make sure you are contributing what you want to your employer’s flexible spending account or your own health savings account. If you left money unspent in your FSA, check to see if there is a grace period to take advantage of it, Mullins said.

Chandler Wilson, estate planning attorney with Crowe & Dunlevy, said a financial self-check doesn’t have to be complicated. If you’ve never given it a thought, start slowly.

“It can be as simple as creating a budget and saving a set amount or percentage of income each month. This can be especially important for those who are younger and just starting to build wealth or for those who may not be new to working but are new to thinking about their financial future,” Wilson said.

Everyone, regardless of age or financial status, should be mindful of how they spend their income, she said.

If you are in debt, consider using any windfall, like a bonus, to pay off debts before using that money for anything else, Wilson said.

After becoming debt-free, start investing part of your income either on your own or by hiring someone to do it for you. But give yourself the freedom to spend a small amount on something fun before investing and saving the rest, she said.

A savings option for those with children is Oklahoma 529, a college savings plan that resembles a 401(k) or Roth IRA in the sense that funds are invested in things like mutual funds and other similar investments, Wilson said. A married couple can deduct up to $20,000 and a single person can deduct up to $10,000 of Oklahoma income taxes under a 529 plan.

The earnings on the plan are 100% tax-deferred, and the withdrawal will be tax-free if it is used for education expenses at an accredited college or CareerTech center, she said.

Lastly, it is crucial to create an estate plan, especially a will and a trust, regardless of how much or how little you have, Wilson said. “Probate can be long and costly, and having a trust that is funded with all your assets will allow you to avoid the probate process and allow you to maximize what is passed down to your family. Having a good estate plan can also provide a lot of peace of mind if something unexpected happens.”

Mullins said another area to check is your retirement accounts. Maybe you have become eligible to contribute to your company’s retirement plan. If you already contribute and received a significant pay raise, consider if you want to increase that amount.

People looking forward to retirement or already there need to make sure they understand how Social Security and their various retirement accounts work, Mullins said.

“Make sure your required minimum distributions (often at age 72) are set up. If not, there can be big penalties and fees to have someone fix it,” he said. “You’ll get to keep a lot more of your money.”

Mullins said it is common for one spouse to pay attention to all these things and the other not to, which can become a big problem when someone loses a spouse.

“If you depended on someone else it can be overwhelming,” he said.

“At a minimum know where passwords are and how to get them. The only thing that gets you into any account is knowing the password,” Mullins said.

See the Journal Record article here:

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