How to Handle Financial Chores
I need to start by confessing. I made a terrible mistake even though I was warned not to do it. What’s this dreadful mistake? I accidentally dried my wife’s sweater.
While doing laundry the other day, I got wrapped up in all the other items I was washing, drying, and folding. We were enjoying a fun date night of watching TV and folding laundry together while the kids slept upstairs. Suddenly I heard the dreaded words of disappointment.
“Kyle,” she said, “you dried my sweater.” I thought about protesting my innocence. When I turned to look at her, sure enough, it had shrunk several sizes. My wife is petite, but the sweater was shrunken so much that it’s now unusable.
Helping with the laundry was me trying to do the right thing. Unfortunately for my wife and the sweater, I got overwhelmed and made a mistake.
What I had envisioned as a way to help and share time together didn’t go as planned. Like so many other chores, doing laundry is something I dislike. The reason is that it has to be done continuously. Over and over, a load of laundry must be done every few days.
I know you’re asking yourself, “What does any of this have to do with financial chores and planning?”
Financial chores are similar to the chores in life that must be done over and over again. You may not enjoy the idea of having financial chores, but it’s important to revisit your financial plan periodically to ensure it’s still the right one. There may be some routine change you aren’t aware of or confident in. Every once in a while, you may dry a sweater, financially speaking.
With a new year upon us, here are three financial chores that may give you pause or something to think about. Just like doing laundry over and over, some things always need to be evaluated, especially as you’re saving for retirement.
Financial Chore #1:
Know the Retirement Plan contribution limits.
Retirement Plan contribution limits have changed for 2023. With inflation being historically high, the retirement planning contribution numbers have bumped up to keep up with it. If inflation is higher, you may need to save more to maintain your lifestyle down the road.
One of the things that the IRS has done is change the amount of money you can put into your retirement plans and stay within the limits. Most Disney cast members, leaders, and employees use the Disney 401k benefit. For those under 50, the new maximum you can put into the 401k is $22,500 for 2023. If you are over 50, you can do what’s called a “catch-up provision,” which is $7,500.
Disney’s contributions don’t give you a dollar amount. They are done by a percentage. To get the percentage, you’ll take your $22,500 if you’re going to max out under 50 or $30,000 total if you’re going to max out over 50 to get the percentage.
Example:
For easy numbers, let’s say your income is $100,000. You want to put in $22,000. That is 22% of your income that needs to go into the 401k.
When you make that change, you need to account for the time that you make the change. If you are making the change today, there has already been one week of contributions that have gone in because Disney pays every Thursday.
Try to account for that and bump it up a little bit or stay at the 22% and be okay with it. Try to have the percentage equal to max out over the course of the entire year. You don’t want to max out too early because it may cause you to miss out on some company contributions.
If you’re contributing to IRAs or individual retirement accounts, those limits have also bumped up. Whether a traditional IRA, Roth IRA, or a backdoor Roth IRA transaction, those numbers have bumped up for those under 50 to $6,500 with a $1000 catch-up for those over 50. Just be cognizant of those numbers as you make your contributions for the year.
Financial Chore #2:
Consider your withholding amounts.
Because of inflation, tax brackets have adjusted this year as well. They have increased somewhat, so you may need to adjust the withholding on your income if you currently work at Disney. The amount of your withholding may need to be reevaluated.
If you’re retired from Disney, looking at your pension, Social Security, retirement withdrawals, etc., may be necessary. You may want to withhold a different amount based on what you think your income will be with the new tax brackets, numbers, and how you file your taxes (single, married, joint, etc.)
Run the calculations for:
- What your expected income for the year will be
- What amount of tax will you owe
Adjust the withholding amount accordingly, so you don’t have too much or too little. Too much withholding gives the government a tax-free loan by overpaying. Too little will have you owing money that will have to be paid back when you file your taxes next year.
Financial Chore #3:
Evaluate your investment strategy.
Like doing laundry, you must regularly revisit and reevaluate your investment strategy. You may find that you don’t need to make a change. Maybe you should. You won’t know unless you understand your goals and plans.
- Where are you at
- What are you trying to accomplish
- What has the economy given us
- What has the world given us
- Are you closer to your goals
- Do you need the money sooner
The answers will then trigger whether you need to change your investment strategy or not. You may also want to change some of the individual holdings. You may want to stay invested in stocks, but one international investment fund may be doing better than another, and so on.
If you’re a client of mine, that’s part of the process we regularly review on your behalf. Nonetheless, it’s still good to have an idea of your overall strategy and whether you need to make a change.
With stocks down so much last year, it may present an opportunity to buy more. If you need the money sooner, you may need to change that strategy to have access to the funds.
These basic financial chores, when done regularly, can keep your finances in a healthy place. I may not be great at doing the regular laundry, but if you have questions about your financial chores, I’m happy to help.
We can meet virtually or in person if you live in the Central Florida area. Please email me at kyle.newell@newellwm.com, call/text at 407.337.7128, or schedule a meeting at Schedule – Newell Wealth Management (newellwm.com)
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