PERSONAL FINANCE

Pop the cork on these 7 surefire financial tips to kick off 2022

As 2022 begins, COVID still dominates our daily life, inflation is raging and the stock market beckons. That's a lot for investors to consider.

There are a few drops left in the champagne bottles and the confetti hasn't yet been swept away. New year’s hangovers have barely worn off, but it’s already time to consider your first money moves for 2022.

A new year always means a new set of circumstances. Today, the COVID-19 pandemic still dominates daily life, inflation is raging and the stock market beckons. There's a lot for investors to consider, so let's get to some surefire smart money moves to start the new year right.

Pop the cork on these seven tips:

Rebalance your portfolio

The surging stock market may have thrown the percentages of your portfolio holdings out of whack.

“If someone hasn’t rebalanced for the past three years they are sitting pretty heavy in stocks,” said Ray LeVitre, a certified financial planner and founder of the Net Worth Advisory Group in Sandy, Utah. “Rebalancing would force them to sell a little bit of their stock portfolio today at all-time highs and reposition in bonds.”

Though it may be hard to stomach bonds’ dismal performance lately, prudently shifting away from excess stock holdings can be deemed a necessary defensive move to protect one's sanity from a severe market correction.

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Many investors comb their portfolios for money-losing stocks after strong years for market performance to try to cut their tax burden.

Reinvest stock proceeds from 2021

Sold losers in 2021? Repurpose that money. Many investors comb their portfolios for money-losing stocks after strong years for market performance to try to cut their tax burden. Whether the strategy was to rebuy a similar stock or fund or head in a fresh direction, now is the time to weigh the move. The alternative is to let those proceeds sit on the sidelines. Or it can become this year's spending money. LeVitre recommends people have six months to a year of liquidity, meaning it might be wiser to keep that cash out of the market.

Max out on I Bonds

One of the few sure bets in investing lately has been inflation-protected government I-bonds. Since November, they have paid 7.12%. While the rate resets every six months based on the level of inflation, it can’t fall below 0%, meaning your principal is protected.

The catch? I-bonds have to be held at least 12 months and you can only buy $10,000 worth of them in any calendar year. The dawn of 2022 means those who dove in last month can double down this month.

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Prune your subscriptions

Time to boot any subscriptions you aren’t using anymore. “It’s so easy to go online and click and pay and (not) realize what you signed up for,” said Ted Jenkin, author of The 21 Day Budget Cleanse.

Consumers should check their credit card statements to see a full list of the subscriptions, keeping the ones they use and banishing any they don't.

One of the few sure bets in investing lately has been inflation-protected government I-bonds

Create your spending plan ...

If you haven't already created your budget, now is the time before the months start flying by. Normally, consumers include their projected household spending during the year and add in whatever splurges or special needs they expect. This year, however, there’s another factor to be taken into consideration: Inflation.

Kevin Lao, a certified financial planner and a director of Imagine Financial Security in St. Augustine, Florida, said he is going through all his clients’ plans to reset the assumption of inflation to 3% to 3.5%. “Even if inflation isn’t long term, they will be in a much better position,” Lao said.

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…and scout for bargains

Online merchants may vary prices during the year. For those buying online from Amazon, author Jenkin, a certified financial planner who heads oXYGen Financial, recommends using an online price tracker like camelcamelcamel.com (yes, that’s the name) in order to try to time purchases to days when prices fall.

Map out how you’ll pay for it all

Families need to sometimes dip into their savings for some large purchases or emergencies. For retirees, it’s more complicated. Many typically have cash in buckets with varying rules. Now is the time to come up with a strategy to take maximum advantage of the spend down.

Those who fear that they could face a tax increase down the line may decide it’s wise to take money out of their 401(k)s or other taxable accounts for this year’s spending needs, Lao said. Look at them and other accounts with different tax rules, like Roth, to come up with a spending plan that maximizes growth and reduces taxes over the long run.

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