By: Charlestien Harris

It is almost 2022 and the end of the year is already upon us.  It is so easy to get caught up in the moment of Thanksgiving, Christmas, and other celebrations.  Just as you want to go into the upcoming year physically healthy, you should also want to be financially healthy as well.  While you are enjoying all the holiday festivities, there are a few money moves you might want to think about making to secure your family’s financial health in 2022.

• Think about giving to a charity.  Almost 20 percent of contributions made to nonprofits take place in December, according to the Giving Institute, an organization that records those statistics. In a year of unprecedented events and challenges, charitable giving reached a record $471.44 billion in 2020.  If you plan to make a donation, check that the charity you choose qualifies for tax-exempt status and that you get documentation of your gift, such as a receipt or bank record. You have until Dec. 31 to make contributions and claim them on your 2021 taxes. Contributions made by using a credit card in December but not paid until January count, as do those with checks postmarked in December that aren’t cashed until after the new year.

• This is a great time to correct mistakes on your credit report.   By law, you are entitled to one free credit report every 12 months from each of the three major bureaus, Equifax, Experian, and TransUnion.  December is a good time to order a report and check it for errors. I always recommend that you stagger the reports by requesting one now, the second report in four months, and the third in eight months. I have found this is the best way you can get up-to-date reports and remain alert to errors or changes throughout the year.

To dispute an error on your credit report, contact in writing both the credit reporting bureaus and the retailer that provided the information. Explain what you think is wrong and why, and include copies of documents that support your dispute. The Consumer Financial Protection Bureau website, www.consumerfinance.gov, provides instructions (PDF), template letters (PDF), and more information to help guide you in the process.     

• Another move you might want to make is to put a freeze on your credit report. Data breaches were fairly common this year, several were announced and your personal data is now less likely to be secure. If you’re not actively in the market for new credit, the best way to protect yourself is to put a freeze on your credit reports. That will stop criminals who don’t already have your data from opening fraudulent accounts in your name.   A credit freeze won’t prevent your existing creditors from accessing your credit report, but it will block new creditors from seeing it.  The fastest and easiest way to freeze your credit is by going online to the websites of each of the three credit bureaus.  There used to be a cost for this service but thanks to the 2018 Economic Growth, Regulatory Relief and Consumer Protection Act, freezing and thawing your credit file is now free in every state and with every bureau.  When you initiate a credit freeze, you will be given a PIN or password that you can use at any time to lift the freeze.  By law, the bureaus must lift the freeze within one hour of receiving an electronic or phone request or three business days of a mailed request.
• Consider making pretax contributions to lower your taxes.  Now is an excellent time to maximize your 401(k) contributions. The maximum amount you can contribute to your 401 (k) is $20,500 for 2022.  Most people aren’t contributing the maximum to their 401(k) s, or even contributing enough to get their full matching contribution. Though there isn’t much you can do to change your contributions this year, December is a good time to make adjustments for 2022. Visit your plan’s website, or make a call to boost your contribution level.

An additional way to lower your tax bill is to contribute to an IRA. If you don’t have a 401(k), or if you have extra cash to put away, opt for an IRA—you can save up to $6,000 (up to $7,000 for those 50 and older). If you want immediate tax savings, open a traditional, or pretax, IRA. But consider diversifying some of your savings into a Roth IRA, where you contribute after-tax dollars but your earnings and withdrawals will be tax-free. Visit the IRS website at www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits.

• Lastly, consider fully funding your HSA. If you’re using a Health Savings Account, make sure it’s fully funded by the end of the year. Your contributions to an HSA are limited each year. You can contribute up to $3,650 in 2022 if you have self-only coverage or up to $7,300 for family coverage. If you’re 55 or older at the end of the year, you can put in an extra $1,000 in “catch up” contributions.  With HSAs, you get a triple tax benefit—your contributions are made pretax, earnings are tax-free, and withdrawals are also tax-free, if the money is used for qualified medical expenses.

What would you add to your financial to-do list?  I know I haven’t covered all the financial moves that will affect your financial health but it is a good start.  We all have to-do list and our finances should have one too.  You won’t be able to fix everything you may have let go this past year but you can start the upcoming year off right by considering the financial moves I mentioned above.  If you would like more information please call or email me at Charlestien.harris@southernpartners.org or 662-624-5776.  Until next week—Stay financially fit!