Three Steps for Putting Your Financial House in Order for 2022

Key Takeaways

• Check if you owe taxes for 2021 and have that money saved before filing; also explore catch-up contributions to Roth or Traditional IRAs (up to $6,000) until April if you didn't contribute throughout the year
• Estimate your 2022 tax bracket early to decide whether to contribute to Roth 401(k) or Traditional accounts, optimizing tax efficiency based on expected income changes like raises or bonuses
• Rebalance your investment portfolio once per year (no more than 4 times annually) to maintain your target allocation—this forces you to sell investments that performed well and buy underperforming ones, theoretically locking in gains
• Set up automatic 'pay yourself first' savings transfers per paycheck to retirement and brokerage accounts before spending on discretionary items, ensuring you hit your savings targets
• Break down financial priorities realistically: build an emergency fund first, then decide between increasing retirement contributions, opening a taxable brokerage account for early access funds, or saving for a real estate down payment