Happy New Year to our clients, friends, and regular readers of our newsletter. It feels great to have a new calendar on our side to put the challenges of 2022 in our rearview mirror and look forward to the next 12 months. It's always an energy drain dealing with volatile markets, and it can wear on you. However, people have yet to say money management is easy. Achieving success in anything important requires discipline and hard work, and finances are no exception.
But you made it this far. You are still in the game. And the money game is measured in years rather than days or even months. Granted, some days may feel like they are much longer. And so, my first piece of advice for 2023 is to continue to work hard on things you can control and be optimistic even when the world around you isn't. When just about everyone is predicting "doom and gloom," the universe and the financial markets typically have a way of proving the masses wrong. Turn on CNBC, Bloomberg, or any of your favorite social media outlets, and some "expert" will no doubt fill your head with doubt and fear. It takes courage to go against the present narrative and risk your reputation on tv, and it's easier to justify being wrong when so many others take the same view. I encourage you to be above the naysayers, keep a level head, and remember that change is always happening.
Here are five things you can control and get into immediate action for 2023:
1. Update your net worth, income, and expenses in your tracking system. Whether using a notebook, spreadsheet, or software, figure out where you currently stand and where you were a year ago. What adjustments will you need to make this year, if any? Need an updated financial plan? Schedule a review with your financial advisory team and get to work on it.
2. Create and update a monthly budget. Income in vs. expenses out should leave you with a positive net number. The higher, the better. Need a budget worksheet? Here you go:
3. Explore options for your cash savings. The major banks are not passing along the higher interest rates to your accounts. Ask us about our available money market rates and you will be surprised by the difference. Cash management should be back on your radar.
4. Increase your retirement funding contributions. The amount you can contribute to your 401k increased by $2,000 in 2023 to $22,500. IRA contribution limits increased as well. Discover what is available for your particular retirement plan and increase your monthly deductions. Your goal should be to contribute at least 15% of your income toward your long-term goals.
5. Check your updated Social Security records. Go to www.ssa.gov and find out what your new projected benefits are. These figures are essential for the retirement planning process. A key financial principle is: Always know your numbers.
In addition, the Secure Act 2.0 was passed on December 29th. Some changes may affect you. For one, the required minimum distribution age increased to 73 for individuals who turn 72 after December 31st, 2022. And if you are still working and contributing to a SEP or Simple IRA, now you may allocate some of your contributions to a Roth SEP or Roth Simple IRA. Also, you may qualify for a Roth IRA contribution this year because the income limits increased substantially from last year. The standard deduction also increased to $27,700 for married couples filing jointly, up from $25,900 in 2022.
Lots of changes are occurring that may require your attention. The money game has many moving parts and can shift directions rather quickly, and the key to success is to continue looking around, looking ahead, and moving forward. Stay focused on what you can do, and the rest will take care of itself in the long run.
On behalf of our entire team at Ranch Cap, we wish you great success in all your 2023 endeavors. And we are incredibly grateful to our clients who trust our particular squad to contribute.
Gregg Pacitti CFP®
Ranch Capital Advisors