Article published in partnership with Oui Financial

According to financial expert Guillaume Decalf, who founded the financial consultancy Oui Financial in San Francisco, here are some key financial questions to ask yourself at the start of the year to optimize your finances…

1. Do you have an emergency fund?

In general, I recommend keeping the equivalent of 6 months of current expenses (not income!) in an emergency fund. Three months is acceptable, but without good social security coverage in the U.S., it’s best to be cautious.

Having an emergency fund will enable you to deal with unforeseen expenses and give you a certain peace of mind.

If you have more than 6 months’ cash, you can contribute the overflow to an IRA/Roth IRA (see question 4) or transfer the money to a brokerage account.

2. Have you rebalanced your investments?

Rebalance the funds in your securities accounts that are not invested in target date funds (IRA, Roth IRA, 401k, Brokerage Account).

With a sharp rise in the financial markets in 2023, the proportion of your invested assets (stocks/bonds) probably no longer corresponds to your original target. If this is the case, you can reduce part of your bond allocation to increase the equity portion of your portfolio, or vice versa.

If you have individual stocks, this is also a good time to sell some or all of the stocks that have risen in price and buy some or all of the stocks that have fallen.

3. Have you changed your 401k/403b retirement account contribution?

I advise my clients to maximize their retirement account whenever possible, or at least increase their contribution. The new contribution limit for 2024 is $23,000; an increase of $500 over 2023.

What percentage should I save? This will depend on your income.

You can calculate this percentage by dividing $23,000 by your gross income and multiplying the result by 100.

For example, if you expect to earn $100,000 this year: $23,000/$100,000*100 = 23. Enter 23% if you want to maximize your contribution.

As a general rule, I recommend that my clients contribute a minimum of 15% to 20% of their gross salary to their retirement account. If you turn 50 or older during the year, you can contribute an additional $7,500.

4. Have you contributed to your IRA/Roth IRA for 2023?

If you can afford it, contribute $6,500 for 2023 to your Roth IRA, but be aware that your contribution may be limited by your income. The contribution level starts to drop if you earned more than $153,000 (single tax return) and $228,000 (married and widowed tax return). You have until April 15, 2024 to do so.

If you can’t contribute directly to a Roth IRA because you earn too much, you can do a “Backdoor Roth IRA conversion” for 2033. You won’t be able to deduct $6,500 from your income today, but you’ll never pay capital gains tax again.

5. Have you opened a solo 401k or contributed to an SEP-IRA if you’re self-employed?

A SEP (Simplified Employee Pension) gives you the opportunity to contribute to your retirement.

The total possible contribution to a SEP-IRA must not exceed either 25% of company income (20% before deduction of self-employment tax) or $66,000 for 2023. Whichever is smaller. You can open or contribute to a SEP-IRA for 2023 before April 15, 2024.

We prefer an individual/solo 401k, which allows you to contribute $23,000/year as an employee + $46,000 as an employer. It’s too late to contribute to 2023, but it’s still possible to open it for 2024. The money in the SEP IRA can then be transferred to the Solo 401k.

6. Shares : Bonus

  • Set financial goals for the year.
  • Review and update your budget.
  • Review and evaluate your current insurance coverage if necessary.
  • Check and update your beneficiaries on all accounts and documents. Especially if you’ve made a trust in recent months. They should be listed as beneficiaries of your accounts.
  • Draw up or revise your will and estate plan if necessary.
  • Pay off high-interest debts.
  • Take a look at your credit score.
  • Start planning any major purchases or expenses for the coming year.

 

Merci Guillaume Decalf, Oui Financial

MerciSF is not responsible for the advice provided in this article.

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