4. Prioritize paying down high-interest debt
While rising interest rates are good for savers, they can make your debt, particularly debt with a variable interest rate, more expensive. The average credit card interest rate is now 19.34%, the highest ever. This can be catastrophic to those already struggling to make ends meet with high inflation. Analyze your debt to make sure you are getting the deal that best aligns with your goals.
For example, if your credit card interest rate keeps rising, consider consolidating it in a personal loan, which can be more cost-effective if the loan has a lower APR. You could also transfer the balance to a 0% APR card, which won’t charge you interest for a defined period of time, allowing you to pay down your balance more easily, just be aware of any fee to transfer the balance.
5. Save a little extra in your retirement account
For 2022, you can contribute up to $20,500 to your workplace 401(k) if you’re under 50, or $27,000 if you are 50 or over. Doing so on a pre-tax basis reduces your federal taxable income for the year. If you’re expecting a year-end bonus, you could transfer some of that extra cash directly to your 401(k).
And don’t forget about your traditional or Roth IRA. While you have until April 18, 2023, to make those contributions for tax year 2022, you can get ahead of the deadline now. Next year, the contribution limit for 401(k)s increases to $22,500 (and $30,000 for those 50 and older), and the IRA contribution limit will increase from $6,000 to $6,500 (and $7,500 for those 50 and older). If you can’t max out your accounts, try increasing your contributions by 1%. Even a seemingly small amount can add up generously over time.
6. Spend down your FSA
If you have a flexible spending account through your health insurance, the end of the year could be the deadline to spend the funds before you lose them (although for some companies the deadline is later). Check out any of the online Flexible Spending Account stores or Amazon to easily find products that are eligible for your funds. There might be some things that you didn’t know would qualify, like sunscreen, some face washes and acne treatments, menstrual products, and over-the-counter pain killers (the latter two are somewhat recent additions).