6 Ways To Elevate Your Finances Ahead
Secure The Bag: 6 Smart Ways To Elevate Your Finances Now! - Page 3
2025 is essentially halfway over, so now is the perfect time to assess your financial situation and take proactive steps to improve your finances. Whether you’re hoping to boost your savings, reduce debt, or plan for a more secure future, there are plenty of strategies you can implement now to set yourself up for financial success before the year is over.
Here are six ways to elevate your finances now.
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1. Max Out Your Retirement and HSA Contributions
One of the most effective ways to secure your financial future is by maximizing contributions to your retirement and Health Savings Accounts (HSA). In 2024, the IRS allows individuals to contribute up to $22,500 to their 401(k) or similar employer-sponsored retirement plans. If you have an Individual Retirement Account (IRA), you can contribute up to $7,000, with an additional $1,000 catch-up contribution if you’re over 50. If you haven’t yet opened an IRA, a Roth IRA could be a smart option. According to Forbes, Roth IRAs are funded with after-tax dollars, and withdrawals made after the age of 59½ are tax-free, making them an attractive long-term investment choice.
For those eligible, contributing to a Health Savings Account (HSA) is another powerful way to save for the future. You can contribute up to $3,850 for individual coverage or $7,750 for family coverage in 2024. HSAs offer triple tax advantages, as noted by HSA Central. Contributions are tax-deductible, reducing your taxable income for the year. Interest earned in an HSA grows tax-deferred, and as long as the funds are used for eligible medical expenses, withdrawals are completely tax-free. This makes HSAs a unique and powerful tool for both healthcare savings and long-term wealth building. So, be sure to take full advantage of these accounts before the year ends.
2. Donate to Your Favorite Charitable Causes
Donating to charity is not only a great way to support causes you care about, but it can also provide significant tax benefits. If you’re in a position to give, consider making charitable contributions before the end of the year. Donations to qualified charitable organizations are tax-deductible, which can help reduce your taxable income and lower your tax liability for 2024.
The IRS allows you to deduct charitable contributions of money or property made to qualified U.S. based organizations, provided you itemize your deductions. In most cases, you can deduct up to 50% of your adjusted gross income (AGI) for these contributions. However, it’s important to note that certain limitations may apply—specifically, a 20% or 30% limit on deductions in some situations, depending on the type of donation and the recipient organization. Be sure to check the guidelines for your specific situation to maximize the potential tax benefits of your charitable giving.
3. Reconfigure Your Investment Portfolio
The beginning of the year is an ideal time to revisit your investment portfolio. Over time, market shifts and changes in your financial goals may have caused your portfolio to become unbalanced. Now is a good time to reallocate your assets based on your risk tolerance, goals and time horizon. If you’re planning for long-term growth, consider diversifying your investments across stocks, bonds, real estate, and alternative assets. If you’re nearing retirement, you may want to adjust your strategy to ensure a more conservative approach to risk. Regularly reviewing and adjusting your portfolio can help maximize returns and ensure you’re on track to meet your financial goals.
4. Use Your Flexible Spending Account (FSA) for Health Expenses
If you have a Flexible Spending Account (FSA), now is the time to use the funds before they expire at the end of the year (or use the grace period if available). FSAs are offered by your employer and allow you to set aside pre-tax dollars for qualified medical expenses, such as copayments, prescriptions, and over-the-counter medications, the National Institute of Health notes.
For 2024, the contribution limit for Flexible Spending Accounts (FSAs) increased by $150. Employees participating in an FSA can contribute up to $3,200 through payroll deductions for the 2024 plan year. These contributions are exempt from federal income tax, Social Security tax, and Medicare tax, providing significant savings.
In some cases, employers may also make contributions to an employee’s FSA. If the employee’s spouse has access to a separate FSA through their own employer, the spouse can also contribute up to $3,200. Together, a couple could contribute a total of $6,400 toward their household’s healthcare expenses through their FSAs.
However, it’s essential to act promptly, as unused funds in your FSA may be forfeited due to IRS regulations. For FSAs that allow carryover of unused balances, the maximum amount you can carry over from 2024 to 2025 is $640. Similarly, if you have unused funds from 2023, you can carry over up to $610 into 2024. Be sure to check your plan’s specific rules and use your FSA funds before the deadline to avoid losing any of your contributions.
Using your FSA can help reduce your taxable income while ensuring you have funds set aside for healthcare expenses. If you haven’t already, make sure to submit any eligible expenses and plans ahead for next year by estimating how much you’ll need in your FSA.
5. Find Ways to Save Money with High-Yield Savings Accounts or CDs
One of the simplest ways to increase your savings and improve your financial standing is by taking advantage of high-yield savings accounts or certificates of deposit (CDs). With interest rates rising in recent years, many banks now offer higher yields on savings accounts, making them an excellent place to park your emergency fund or short-term savings. You can also explore CDs, which typically offer even higher interest rates in exchange for locking in your money for a set period. By moving your savings into these higher-yield options, you can watch your money grow with minimal effort.
6. Eliminate Debt and Create a Strong Budget
Debt can be a major barrier to financial freedom, so it’s crucial to take steps to reduce it. If you’ve been diligent about managing your debt, consider ways to accelerate the process. For example, if you’re expecting a raise or a year-end bonus, use that extra income to pay down high-interest debt, such as credit card balances or personal loans, Morgan Stanley advises. The more aggressively you tackle high-interest debt, the less you’ll pay over time, and the more money you’ll have to save in 2026.
Along with eliminating debt, it’s essential to revisit your budget as you prepare for the new year. Assess your monthly income and expenses, then determine your financial priorities. With inflation still impacting everyday costs like groceries and gas, your budget might need adjustments to account for rising prices. One helpful method for budgeting is the 50-30-20 rule, popularized by U.S. Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan, according to Investopedia. This rule divides your after-tax income into three categories: 50% for needs (such as housing and utilities), 30% for wants (like dining out or entertainment), and 20% for savings and debt repayment.
Paying off debt and following a tight budget can be cumbersome and downright annoying, but following this structure can help you to ensure that you’re not only covering essential expenses but also building toward a more secure financial future.
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