The year is wrapping up, and many of us are already closing out on our finances. First, we hope you learned a lot and accomplished some of your financial goals in 2022. It has been an incredibly rocky year to be an investor, and the effects of inflation have been tough to manage.
However, as we enter the last month of the year, it’s time to consolidate the wins and prepare ourselves financially for the coming year. So we have compiled a short list of four things you should do before 2023. Here’s that list below:
Take Stock of 2022
Review your income this year. How much have you made in total from all income sources? How much have you spent? How much did you save and invest? What did you spend your money on? What goals did you achieve, and which were deferred or cancelled? Be able to articulate and understand your financial history in 2022 so that you can extract the lessons, adjust your plans and decide what to focus on, what to do more or less of and what your financial goals should be in 2023. This process will be much easier if you’ve been maintaining a budget throughout the year.
Understand the Lessons of History
Everyone is currently worried about the bear market and all the economic uncertainty we’ve had to deal with this year, from rate hikes and inflation to geopolitical flare-ups and climate issues globally. There’s the temptation to become pessimistic and overly defensive about your finances and behave like this is the worst time in history.
But anyone who stops and takes a historical view will realise that times like these have come and gone before, and people not only preserved their wealth during such times but actually grew it. There has been double-digit inflation in the US before, and the world has had worse geopolitical issues. We’ve also had worse bear markets and stock market drops before. And things always bounce back. Markets recover.
Economies grow again. There is a path to navigating periods like these, and panicking and avoiding your long-term financial goals because you are worried about turbulence is not helpful. Take a longer view and stay the course.
Understand and settle your tax obligations
If you are under a Pay As You Earn (PAYE) setup, knowing if your employers are remitting all the required taxes is crucial. Have you paid any portion you are liable for? Is your tax clearance certificate up to date? Have all the numbers ready way before you need them. For people in the US, now is the time to gather all your tax records before next year’s filing deadlines. Make sure you sort out all these on your own so you can file your tax return early next year.
Check your investment portfolio
After the year, some of your investments have gained, and some have lost value. Now is the time to rebalance your investments to reflect your goals and the level of risk you can carry in your current reality. Are you more exposed to crypto than you should be at this point? Then push more of your money into safer investments like real estate. Make sure your portfolio aligns with your long-term investment plan and strategy. Are you investing enough to have enough retirement income? If you’re above 30, it’s almost mandatory that you’re investing at least 20% of your income now. If you’re below this number, cut expenses and step it up.
Set your 2023 goals
Once you’ve done all the above, then you are in a good position to set your financial goals for 2023, and develop a clear plan to achieve them. Mark them out, write them down, and put them somewhere you can see them. Now, you’re ready to flex your Detty December and usher in the new year in style. Enjoy the rest of the year!