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An early fall financial check up can help you end 2023 on a high note

By Mike Zargaj

The end of summer is often associated with shorter days, cooler temperatures and going back to school. The changing seasons also presents an opportunity to check up on your finances to help set yourself up to close the year strong and start 2024 on firmer financial footing.

Given the dramatic shifts we've seen in 2023 -- including the sharp rise in interest rates, shifting inflation, and the roller coaster of the stock market -- it can be hard to know what to expect through the remainder of 2023. By taking stock of your finances, you can give yourself the opportunity to understand how you've fared amid all the change and consider acting upon the areas that are within your control.

Build out that budget

The natural starting place is to pull out your existing monthly budget, if you have one. And if you don't, creating a monthly budget is a solid first step toward taking control of your finances. Given the impact that inflation has had on budgets recently--data from John Hancock Retirement found that the vast majority of retirement plan participants reported increased spending on groceries (95%), household basics (91%), gas (90%), and monthly bill payments (88%)--you may be surprised to learn how much you're spending on your daily living expenses. As a rule of thumb, take the average from your past three months of expenses to estimate your monthly spending across major categories.

On the flip side, American workers have experienced more significant wage growth over the past year than they have in recent history, with the most recent data from the Bureau of Labor Statistics showing a 4.6% increase from June 2022 to June 2023. Updating your budget with your current earnings and expenses can provide you with a quick sense of your ability to save money or, alternatively, identify areas where you may want to consider reducing spending to help balance your budget.

Factor in loans

As of Sept. 1, 2023, the Department of Education's COVID-19 student loan forbearance ended. If you're one of the more than 40 million Americans with outstanding student loans, this means that interest has resumed accruing, and payments will be due starting in October 2023. Given the Federal Reserve's estimate that the average monthly payment is nearly $300, for many, this may represent a material increase in monthly expenses that anyone with student loans in repayment should include in their budgets.

Shop for savings (rates)

Over the past 18 months, we've seen a sharp increase in interest rates due to action by the Federal Reserve. As a result, there may be opportunities to seek out a higher return on the money you keep in your savings account. Because banks and financial institutions tend to compete for deposits, it's worth shopping around to see what rates are being offered, including at online banks and credit unions, to help potentially earn some additional interest on your savings.

Read: The rich are just like us -- they buy CDs too

Retirement ready?

Check in on your workplace retirement plan. See if your budget allows you to raise your monthly contribution, even if it's just by a little. At a minimum, your goal should be to consider contributing enough so that you capture the entire company match, if one is offered. And since 401(k) contributions can be made pretax, you may effectively be lowering your 2023 tax bill by making a larger contribution.

This is also a perfect time to create a long-term plan for retirement, including estimating when you plan on leaving the workforce, how much money you'll need in retirement, and what steps you need to take to get there. Making these important decisions can help put you in better shape to reach your goals.

Plan for tax time

Although most people would probably like to spend less time thinking about their taxes, a little bit of proactive attention can go a long way. Take a closer look at your tax situation--your 2022 return is a great place to start--and try to find opportunities to lower your 2023 tax bill. You might be able to lower your taxes by contributing pretax to an employer-sponsored healthcare plan. And if you're saving for a child's college expenses, consider contributing to a 529 plan, which is tax deductible in many states. In addition, contributions to health savings accounts are tax deductible and offer you a chance to save money on medical costs now and in the future.

If you've sold stock at a profit at any point this year, you may be able to offset some of those gains, and the tax you'll be charged on them, by selling stocks you're holding at a loss before the end of the year.

Of course, you can review your finances any time of the year. But it can be helpful to set up a routine so that each year, as you take out your sweaters and enjoy the cooler nights, you know it's time for a financial checkup. Taking the time to review and update your budget, check in on your spending and saving, and making sure that you're on track for your long-term goals, can help you be ready for the season to come.

Mike Zargaj is head of personal financial services at John Hancock.

Important disclosures

The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent adviser as to any investment, tax, or legal statements made.

Any tax-related discussion contained in this publication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of avoiding any tax penalties or promoting, marketing, or recommending to any other party any transaction or matter addressed. Please consult your independent legal counsel and/or professional tax adviser regarding any legal or tax issues raised in this publication.

John Hancock Retirement Plan Services LLC provides administrative and/or record-keeping services to sponsors or administrators of retirement plans through an open-architecture platform. John Hancock Trust Company LLC provides trust and custodial services to such plans. Group annuity contracts and record-keeping agreements are issued by John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in NY), and John Hancock Life Insurance Company of New York, Valhalla, NY. Product features and availability may differ by state. All entities do business under certain instances using the John Hancock brand name. Each entity makes available a platform of investment alternatives to sponsors or administrators of retirement plans without regard to the individualized needs of any plan. Unless otherwise specifically stated in writing, each entity does not, and is not undertaking to, provide impartial investment advice or give advice in a fiduciary capacity. Securities are offered through John Hancock Distributors LLC, member FINRA, SIPC. NOT FDIC INSURED. MAY LOSE VALUE. NOT BANK GUARANTEED.

(c) 2023 John Hancock. All rights reserved


-Mike Zargaj

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

09-29-23 1410ET

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