4 Ways to Instantly Upgrade Your Financial Plan | Smart Change: Personal Finance | dailyjournalonline.com – Daily Journal Online

Even though the financial marketplace has become saturated with new products, there’s something elegant about committing yourself to the basics.

Here, we’ll discuss four steps to instantly upgrade your financial plan.

1. Max out your tax-advantaged accounts

Since everyone has a different set of circumstances, it’s good to remember that some people will have more tax-advantaged space than others. In other words, some people may have access to an employer 401(k) plan while others won’t, and some people will be able to contribute directly to a Roth IRA while others won’t.

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Before investing in taxable investment accounts, it’s a good idea to contribute the maximum to your 401(k) or 403(b), which is now $20,500 ($27,000 if you’re over 50) for calendar year 2022. At the same time, if the option is available to you, it’s smart to also max out contributions to a Roth IRA, which are limited at $6,000 for 2022 ($7,000 if you’re over 50).

Money invested in tax-advantaged accounts can save thousands in taxes over the long run, so try to use as much space as you can before opting for other investment buckets.

2. Sell single stocks that haven’t panned out

If you’ve bought one or more single stocks and the results have been less than stellar, there is some benefit to cutting your losses early and reaping a tax benefit.

It’s important that investors know that they can lock in investment losses and deduct up to $3,000 from their incomes on their tax returns. Losses in excess of $3,000 can be carried forward indefinitely, so you’ll receive a tax benefit every year until the entire loss amount has been exhausted.

Once you’ve made the decision to sell, you can redeploy the same money into broadly diversified index funds, like ETFs or mutual funds. These securities can be had at extremely low cost, and allow you to spread your money across different sectors, industries, and geographies. These investments also limit your exposure to any one company.

Image source: Getty Images.

3. Don’t look down on cash

While many people deride cash as a low-earning investment, cash serves many purposes that make for a healthy financial picture overall.

Cash provides a feeling of psychological security when markets turn south, and it also prevents you from selling stock to cover short-term emergencies. Selling stocks after they’ve declined is a good way to limit long-term growth prospects, so it’s imperative to always have enough cash on the sidelines.

Moreover, having enough cash serves as a …….

Source: https://dailyjournalonline.com/business/investment/personal-finance/4-ways-to-instantly-upgrade-your-financial-plan/article_d35f24f8-d06f-5d9b-912b-033ba50a6cd8.html

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