5 Financial Moves To Make and 3 To Avoid in 2024
Written by
Heather Taylor
Edited by
Caitlyn Moorhead
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The new year offers everyone the opportunity to make financial plans or resolutions they can stick to year-round. However, it can be easy to feel overwhelmed by the number of choices available. How do you know which money moves are the right ones to make? Keep reading to learn the financial moves you should make in 2024 and the ones you need to avoid.
5 Money Moves You Need To Make in 2024
Rather than guess what you should focus on at the start of the year, follow the tried and true advice of financial planners and professionals. Start 2024 right by making these five financial moves:
- Optimize tax-advantaged account contribution increases
- Utilize flexible savings accounts
- Review cash savings accounts
- Start investing
- Open a CD
1. Optimize Tax-Advantaged Account Contribution Increases
Many tax-advantaged accounts, including 401(k) plans and traditional and Roth IRAs, are increasing their contribution limits in 2024. Consider taking advantage of the increases in income limits and contribution amounts this year. Workers aged 50 and over may be eligible to add an additional catch-up contribution.
Check to see if your amount has increased, as an extra $1,000 may be contributed to your IRA for even more savings in retirement. As you create a financial plan, these contributions can add up in the long term.
2. Utilize Flexible Savings Accounts
Do you receive a flexible savings account, or FSA, as an employee benefit in your workplace? Take advantage of your FSA as it allows you to use your money tax-free for eligible expenses, said Brian Mawhinney, CFP and head of financial planning with MassMutual. Mawhinney said contribution limits are increasing and employees may also carry over up to $610 into 2024.
Mawhinney said healthcare FSAs allow you to use the money for insurance deductibles, medical devices, certain prescription drugs like insulin, co-pays and more. “Limited purpose FSAs are often designed for specific expenses related to dental and vision,” Mawhinney said. “Dependent care FSAs allow parents and caregivers to use the funds to fund child care or even elder care costs.”
3. Review Cash Savings Accounts
David Edmisten — CFP, founder and lead advisor of Next Phase Financial Planning, LLC, also recommends consumers review their cash savings accounts. Start looking for ways to increase the amount of interest you earn in 2024.
“Many people continue to hold large amounts of savings in a regular savings account at a large retail bank,” Edmisten said. “Interest rates in a regular savings account are much lower than other options. Online high-yield savings accounts are around 3%, and CDs and Treasury bills are paying even more. Consumers can increase their interest income by considering higher earning options for their cash accounts.”
4. Start Investing
If one of your 2024 resolutions to improve your financial life is to invest, start now and determine your risk tolerance when diversifying your investment portfolio. As an example, Daken Vanderburg, CFA and chief investment officer at MassMutual Wealth Management, said to imagine two investors named Kevin and Kim as an example:
- They each invested $100,000 total and both earned the same interest rate. Yet, Kim ends up with $4.5 million more than Kevin.
- How did this happen? Vanderburg said Kevin begins investing when he turns age 30. He has $100,000 saved and earns 10% per year through investing without ever investing another dollar.
- By the time he retires at 65, Vanderburg said he has a sum of $2.8 million.
- Kim, Vanderburg said, understands the power of investing and compounding interest in her early years, and figures out a way to invest the same $100,000. Instead of starting at age 30, Kim starts investing at age 20.
“That’s it. No other difference from Kevin. She also earns 10% per year and does not contribute another dollar. At age 65, Kim has nearly $7.3 million,” Vanderburg said.” That is the phenomenal power of compounded interest.”
5. Open a CD Account
Certificates of deposit are a type of savings account where you can earn interest at varying APYs. What you earn is dependent on what fixed interest rates and CD terms your bank or credit union offers.
This type of account is great for savings goals as you cannot access the money until the account is matured. You can earn interest on a lump sum for a fixed period, but the money can’t be touched for the entirety of the term to avoid early withdrawal penalties.
3 Financial Moves To Avoid in 2024
When looking to increase your net worth, it could be tempting to try every financial move you can think of. However, you should exercise some caution with certain investments or endeavors. Here are three things to avoid in 2024:
- Taking out high-interest loans: It’s one thing to take out a loan for emergencies, but make sure you understand what the interest rate, APR or other repayment expectations are as you could be signing up for a difficult cycle of debt to escape.
- Overusing your credit card: Credit cards are great for certain spending but make sure to pay your bill in full and on time otherwise, you could be wracking up debt and high interest payments. Spending money you can’t afford to pay back will compound your debt.
- Under-contributing to your 401(k): Not maxing out your 401(k) plan in 2024 means you are leaving money on the table. Make sure to take advantage of your employer’s match every paycheck. The new year is a great time to increase your contributions as well.
Final Take To GO
No matter what your resolutions are for 2024, make sure you include some savvy financial moves into your long-term goals. The steps you take now to improve your wealth management will only send you into a more comfortable financial future.
Caitlyn Moorhead contributed to the reporting for this article.
