Making Financial Lemonade Out of Last Year’s Lemons
Yes, 2022 was pretty bad for our investments. U.S. stocks down 18%. International stocks were down 14%. Even those “conservative” bonds fell 13%. And don’t get me started on meme stocks. GameStop took an ass-whooping 55% hit, and AMC dropped more than 80%.
The biggest culprit for this was sky-high inflation. Not inflation itself per se, but the effects of it. The Fed raised interest rates dramatically to try to contain it. And higher interest rates meant everyone paid more for accessing money. So the market adjusted to reflect the new reality of higher borrowing costs.
But not everything is bad news. First, if you have a financial plan in place, you are prepared for shit like this to happen. That’s because a good financial plan anticipates that markets don’t always go up and proactively prepares for it by allocating your investments accordingly. Second, in 3 Actionable Strategies to Consider When Markets Take A Dump 💩, I laid out some things you can do to take advantage of down markets. Those strategies are still available to you right now so if you didn’t take advantage of them last year, get off your ass and do them now. And finally, let’s make lemonade out of this sky-high inflation.
Inflation has given us a huge opportunity to pay less taxes and save more as these numbers have been significantly adjusted to account for it. For example, the standard deduction and marginal tax brackets are about 7% higher in 2023 than in 2022. This means that more of your income is getting sheltered from taxes. And you can now save more, too. Traditional IRAs and Roths allow for $6,500 contributions in 2023, up from $6,000 in 2022. In 401ks, it’s $22,500, up from $20,500. HSAs: $7,750 for family plans vs $7,300.
See, it’s not all bad news. But this only works if you actually do something about it. So turn that frown upside down and get to work.
If you want help getting started with these strategies, click below to schedule a free intro call today.
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