(WSPA) – There may be a lot of uncertainty when it comes to the economy as the new year gets started, but financial experts said this may actually be a prime time to grow wealth.
7NEWS got expert advice on smart money moves to make in 2023.
First, let’s set the scene. Who better do to that than a long-standing financial planner and CEO of Alloy Wealth Management, Mark Henry.
Henry warns many Americans are in for a bumpy ride in 2023. Henry doesn’t mince words.
“Let’s be very clear, regardless of what many people will tell you, we are going to be in a recession. It is absolutely going to happen,” Henry said.
He adds the time is ripe to not only use that reality to plan wisely, but also if possible, invest wisely.
Basic financial necessities
First the basics:
- Make sure your budget includes contributing to any emergency fund that is less than three to six months’ worth of your expenses
- Make a plan to pay off credit card debt. Credit card interest rates are at record highs. One smart move is to transfer that balance to a card that has one of those “zero interest for the first year” offers and set a budget to pay down that debt, or as much as possible, this year
- Reassess your investments and work with an advisor, some can be free with certain investment firms like Charles Schwab and Fidelity, to see if you need to make changes
Focus on job security
With the recent hot job market, job security has not been a primary focus for a while. However, Henry predicts that is about to change, and he said now is the time to impress your boss.
“It’s not going to be a good time to be finding a job in early 2023 or mid-2023 when this recession gets in full swing, so start preparing for that,” he said.
Planning for retirement is one of the most important money moves you can make, and nothing is more valuable than your company’s 401K match, which Henry calls, free money.
20% of American workers still don’t contribute enough to their 401K to take the full match and financial experts said that’s one of the worst money mistakes.
Financial advisors recommend you take advantage of a combination of traditional and ROTH 401Ks if your employer offers both.
The traditional 401K, or IRA, is tax-deferred and the ROTH is where you pay taxes upfront, but not when you take the money and gains out after you retire.
So, both are useful to your overall financial picture.
What about taxes?
As for short-term planning, tax expert Dan Thomas, with Jackson Hewitt, said do not bank on as much or any money back this tax season.
“Taxpayer refunds will be substantially less than last year. The average family with 2 to 3 children saw an extra child tax credit and earned income credit last year,” Thomas said. “So last year we had many refunds that were as much as $10,000- $20,000. Those refunds are going to be almost half of what they were last year.”
How can you grow investments in 2023?
Banker Mike Lee predicts 2023 will actually be ideal for buying low, in the Stock Market or other investments, because the downturn in the economy is driving down the price of certain stocks.
“We are stockpiling cash right now,” he said about his personal finances. “If you can it’s going to be a great time to buy in the stock market in the next 3 to 6 to 12 months.”
If you have suffered losses, you can always claim up to $3,000 a year in tax breaks or offset other earnings in your investment portfolio.
Also, keep in mind, any savings account will earn more with higher interest rates, including an I bond, which adjusts for inflation and gives about 7% back.
Keep in mind…
If you’re on social security, you’ll see an 8% cost of living adjustment, but do plan ahead in case that kicks you into a higher tax bracket.
Finally, while inflation is still very real, prices on everything from used cars to gas to appliances continue to drop, for the most part.
If inflation is eating into your budget, switching to low-cost grocery stores like Aldi’s or changing habits like that daily Starbucks addiction can go a long way to restoring your cash flow.
No matter your outlook, if the downswing is motivation to shine at work, get serious about tackling debt, and if possible, explore new investments, chances are you’ll round out the new year better off than you started.
Finally, check your free credit reports
As you take stock of your overall financial outlook, be sure to take advantage of the free credit reports you can get at these three credit reporting agencies: