Whether or not you made any New Year’s resolutions for 2024, you may want to work your way through this financial to-do list. No diet or exercise is required, and you only have to take a few steps to improve your financial health and security.
Change your passwords. Data breaches continue to make the news, and hackers never sleep. Here are some strategies to keep your personal data safe:
- Use a different password for each account.
- Use longer, complex passwords with at least 12 characters.
- Consider using a password generator like McAfee’s – it’s free.
Protect important documents. Ensuring that you have both digital and physical copies of your most valuable documents ensures that you’ll always have an accessible copy. This is especially important in case of a disaster, as you’ll need one or more of these for an insurance claim. Physical/paper copies can go into a fireproof safe or bank-safe deposit box. Electronic/scanned copies should be password-protected and stored on an external hard drive or flash drive. This drive can also go into your fireproof safe or deposit box.
Review your W-4 holdings. While you can change your withholding for any reason, you’ll need to review yours if any of the following have happened recently:
- Your household income has changed.
- You and/or your spouse went through a period of unemployment.
- Your family has grown, or a grown child has departed the home.
While it can be difficult to estimate the results of a changed W-4, you will probably want to err on the side of caution, going for a possible refund instead of an unplanned tax bill.
Plan for Tax Refunds
If a tax refund is headed to your bank account, deciding what to do with it may not be an easy decision. Here are five options that are recommended by financial planners.
- Pay Off Debt. If you have balances on any credit cards, these should be first in line for your windfall. Inflation may have pushed your credit cards’ interest rates higher than you realize, especially if you have set up autopay and rarely review your monthly statements.
- Bump up your emergency savings. Ideally, working adults should maintain a cash reserve that equals around three to six months’ worth of living expenses. If you’d rather reserve some of your windfall for other things, consider setting aside a smaller amount each month.
- Boost your retirement fund. Putting cash into your 401(k) or retirement savings is always a smart move. For example, if you deposited a $3,000 bonus into an index fund with an average 7% annual return, the $3k would grow to over $24k in 30 years.
- Invest in education. If you’re looking for ways to move up in your career, consider using your bonus to earn new skills and/or certifications. If you’re planning to send a child to college, consider a 529 College Savings Plan.
- Reward yourself. There’s nothing wrong with treating yourself to a night out, a weekend trip, or a visit to a favorite retailer. A bonus is a reward for your hard work, after all, so why not have some fun with it?