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5 money moves to make now to ensure financial success in the new year

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The end of the year is an important time for making financial decisions that can have an impact in the year ahead — and for years to come.

From your work to your savings and investments to spending and giving back, here are five moves you should consider making before Dec. 31 that can help to prepare you for financial success in 2023:   

1. Make sure you didn’t pay too little tax on 2022 income

You don’t want to wind up paying interest and penalties or a big tax bill next year because you didn’t have enough tax taken out of your pay this year. Even if you were laid off recently, it’s important to double-check so you don’t get an unexpected tax hit. And, if you’re retired, make sure you paid the appropriate tax on your retirement withdrawals. 

The IRS says one way to see if you’re on track to pay the right amount of income tax is to pay the same amount as you did in 2021 or, for higher-income taxpayers, maybe a little more. Keep in mind that even if you got a tax refund last year, with no stimulus payment for 2022 and a less generous deduction for charitable gifts, you may receive a smaller refund in 2023.

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You can also do a “paycheck checkup” by going to the Tax Withholding Estimator on the IRS’ website to review the amount of tax withheld from your pay. You may have time to make a change to your withholding for the last pay period of the year by submitting a new W-4 form to your employer. If it’s too late to make a withholding fix that way or if you’re self-employed, you can send an estimated tax payment directly to the IRS. The deadline for fourth-quarter payments is Tuesday, Jan. 17, 2023. 

2. Increase your 401(k) plan contributions

3. Boost your emergency savings

Having easy access to cash to cover unexpected expenses is also critical. Yet a new survey from Betterment at Work finds only 59% of employees currently have an emergency fund — a 7% drop from last year, leaving 41% without any sort of safety net.

With recent layoffs and worries about a looming recession, getting a temporary job may help a lot. A part-time job in retail or a restaurant or doing some holiday decorating for a fee may help you come up with more money to save. 

The Federal Reserve’s interest rate hikes this year have resulted in higher rates on many online-only savings accounts. Some such accounts are paying as much as 3.5% interest with no minimum balance, according to Bankrate.com.

4. Plan how you’ll spend before you buy

If you just can’t afford to save more right now, just make sure you don’t overspend. Figure out how you plan to pay for a holiday purchase before you buy it. Using cash instead of credit can help you stick to your budget and stay out of debt. Some merchants will charge you less for paying cash to avoid credit card transaction fees. By paying cash, you could in some cases, wind up paying 3% less than the purchase price. Digital payment apps — ApplePay, Venmo or CashApp — can also work like paying cash. 

Using a credit card gives you more consumer protections than a debit card and you may get rewards too: cash back, or airline or hotel points. Choose a low-rate card or a card with a 0% interest introductory offer, especially if you think you can’t or won’t pay your balance in full at the end of the billing cycle.

Be wary of store credit cards. The average retail store-only credit card charges over 28% interest, according to CreditCards.com.

Also, be careful if using buy now, pay later products, a popular option for online shopping at many retailers. While you can spread out payments for purchases with no interest, buy now, pay later loans aren’t subject to the same regulations that apply to credit or debit cards. There are fewer purchase protections, too, including the ability to dispute a charge if you bought a good or service that wasn’t delivered as promised. 

5. Consider how you’ll contribute to charity this year and next

It may be more difficult to claim a charitable deduction this year than in the past two years. You can no longer automatically tax an above-the-line deduction for cash donations; you must itemize deductions on your 2022 tax return.

Yet most people likely will choose not to itemize because doing so may not offer as great a tax break as taking the standard deduction. For 2022, the standard deduction is $12,950 for single filers, $19,400 for head-of-household taxpayers and $25,900 for married couples filing a joint return. 



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