At this point in the year, a lot of people are fixated on the holiday season and the countdown to 2022. If you’re one of them, you may not exactly have financial matters on the mind.
But actually, the moves you make in the coming weeks could set the stage for a financially healthy 2022. Here are four items worth checking off your list to end 2021 in a positive place.
1. Boost your emergency fund
We all need money on hand for emergencies, like when your car needs a sudden repair or your manager decides to cut your hours at work. Ideally, your emergency fund should have enough cash to cover three to six months of essential bills. If you feel your savings could use a boost, now’s a great time to sneak more money in there.
Of course, with holiday expenses piling up, eking out savings may be a challenge. But if you’re getting any sort of extra cash this month, whether it’s a bonus at work or your final monthly Child Tax Credit installment payment, putting that money into your savings is a solid move.
2. Pay off some debt
If you’d rather not start off the new year with a heaping pile of debt hanging over your head, then now’s the time to work on chipping away at some of your balances. Take a look at your credit cards and see what you owe on them. If you have a few hundred dollars to spare, paying down the balance with the highest interest rate attached to it is a smart bet.
At the same time, if you’re in debt already, do your best to not add to that load by charging a ton of holiday expenses. If need be, explain to your loved ones that you have to go lighter on gift-giving this year to avoid closing out the year deep in a hole.
3. Put more money into your retirement plan
Saving more for retirement isn’t something that will just benefit you later in life; it could also result in a lower tax bill for 2021.
If you participate in a traditional IRA or 401(k) plan, the money you contribute may be exempt from some of this year’s earnings from taxes. For example, if you put $5,000 into a 401(k) plan, the IRS won’t tax you on $5,000 of your income. The same could be true for an IRA if you qualify.
Now technically, you have until next year’s mid-April tax-filing deadline to put more money into an IRA. But if you want to stash more money in your 401(k), you’ll need to get moving quickly. That’s because 401(k) contributions are made as a payroll deduction, and you’ll need to give your employer enough time to process that change for it to count for the current year. Once January rolls around, you can no longer contribute to your 401(k) for 2021.
4. Take steps to improve your credit score
Maybe you want to buy a home in 2022. Or you may want to get a new car or credit card. Either way, the higher your credit score, the more likely you’ll be to not only get approved for whatever loan or line of credit you want, but snag a competitive interest rate in the process.
Take a look at your credit score. If it’s already in the upper 700s or higher, you’re in really good shape. If it’s lower, you can take steps to boost your credit score, like checking your credit report for errors (and correcting the ones you spot) and paying off some of your existing credit card debt.
The steps you take in the coming weeks could really set you up nicely for 2022. Aim to check these items off your list so you can close out the year in a solid place.