10 actions to help you take charge of your personal finances

Amanda Lott, Head of Wealth Planning Strategy

Sarah Backer, Wealth Planning Strategy

The new year is an opportunity to make a fresh start—and we can help you make the most of it.

Last year, many people felt like much was out of their control, given the market volatility, downturn in both stocks and bonds, rising inflation, the Federal Reserve’s fastest-ever set of large interest rate hikes and more. 

While we expect economic growth to be relatively slow this year, we also see significant potential ahead for investors.¹

But no matter what turn the economy and markets take, there’s much you might do to help optimize your personal finances. Here, we offer 10 actions to consider taking now.

Assess where you are

1. Ready your portfolio for the year ahead. Given 2022’s market volatility: Is your overall plan still on track to meet your goals? Does each pool of capital still support your intention for it? Are you taking the right amount of risk for your goals and time horizon? How do you feel about the level of risk you took last year?

Your feelings and priorities as well as current market conditions should shape your portfolio this year. As valuations have recently reset, we believe there has not been a more attractive entry point for a traditional portfolio of stocks and bonds in over a decade.²

2. Hold your cash wisely. How much cash are you holding? We recommend having only enough cash to fund a few years of living expenses, meet any near-term large outlays, keep on hand some “dry powder” to fund opportunistic investments and serve as a psychological safety net. As you look to invest this liquidity, we suggest you consider getting into fixed income now because it’s offering stronger valuations and higher yields than have been available since 2010.³ After meeting those needs, you should put any excess cash to work toward your longer-term goals.

3. Review your life insurance policies. If you have any life insurance policies, review them to make sure they still support your goals. Have your circumstances changed since you last looked? For tax and estate planning purposes, does the right person own the policy and are the optimal beneficiaries named? Is its cash value depleted because of last year’s volatility?

Many people with illiquid estates have life insurance to help pay estate taxes. Life insurance can also be beneficial for wealth transfer, business owners’ wealth plans and as part of a portfolio of financial assets. 

Take the right steps

4. Complete the annual “to-dos.” Each year there are certain steps you should take. Completing them earlier in the year is often more tax-efficient.

a. Fund retirement accounts—Fully fund retirement accounts to take advantage of their tax-deferral benefits. For 2023, the contribution limits for accounts such as 401(k)s or 403(b)s are $22,500, and $30,000 if age 50 or older. For IRAs, the limits are $6,500, and $7,500 if age 50 or older.

b. Make annual exclusion gifts—If you have the capacity and desire to gift, using your annual exclusion each year is a powerful way to do so without any gift tax consequences. This year, the limit increased to $17,000; for married couples, it’s $34,000.

5. Consider using your full lifetime transfer tax exclusion. The lifetime exclusion amount increased this year to $12.92 million per person ($25.84 million for a married couple). If you have the capacity and desire to give to your loved ones during your lifetime, consider making your gift this year (the exclusion amount is scheduled to decrease in 2026 to about $7 million).

Even if you’ve already used all of your exclusion, this year’s annual inflation adjustment to the exclusion amount means that individuals can gift another $860,000 tax-free this year (that would be $1.72 million for married couples).

6. Increase your portfolio’s tax efficiency. We suggest three possible actions for tax efficiency here: First, to keep as much of your portfolio’s returns as possible, you’ll want to consider the account types your assets are held in. Generally speaking, asset classes that generate ordinary income, have high turnover and offer high returns are best held in tax-advantaged accounts.

Second, to help make the most of your taxable accounts, consider investing in a strategy that allows you to harvest tax losses continuously.

And third, if you’re making withdrawals from your portfolio, think about the proper order of accounts from which you should take cash.

7. Adjust to higher rates. In 2022, the Fed hiked rates seven times, and this year, more increases may come. But don’t let these increases discourage you from considering rate-sensitive wealth transfer techniques such as grantor retained annuity trusts (GRATs) and intra-family loans.

The success of these techniques depends heavily on the assets’ growth. We believe it’s therefore more important to look at the assets’ potential for appreciation than interest rates. If you have an existing GRAT, look into whether you might be able to swap out any depressed assets (replacing them with cash), and use those assets to fund a new GRAT with a better chance of success.

Higher rates have made leverage more expensive now than it was a year ago. Still, you might want to consider establishing a line of credit that can help you manage lumpy cash flows and potentially take advantage of compelling investment opportunities.

If you have an existing adjustable-rate mortgage (ARM) that will reset this year, it would be wise to check the ARM’s cap, as many rates are set to increase considerably. You might be able to fix your rate at a lower level.

Protect your family and values

8. Plan your charitable giving. First, look at the charitable gifts you made in 2022 and ask yourself: “Which causes do I want to continue supporting this year?” Then consider the best way to give.

In times of economic uncertainty, being both strategic and intentional with your charitable gifts can help maximize their impact and provide stability to the organizations you support.⁴

Especially if you’re expecting 2023 to be a high-income year, consider contributing to a donor-advised fund (DAF). With a DAF, you can receive an immediate income tax deduction for your contribution but decide on which nonprofits to support when you’re ready.

9. Articulate your family’s values. The new year is a good time to reflect and recenter your family around the family’s values and a collective vision of success. Consider hosting a family meeting to align the entire family, educate members on topics of common interest, and share family history and stories.

10. Protect your accounts and devices. Safeguard your assets and information by implementing the right controls. Enable account alerts to receive notifications of potentially unauthorized activity and enroll in fraud prevention services such as ACH debit block for enhanced security. And remember to periodically update and strengthen your passwords to be strong and complex so they cannot be easily guessed – and never share them.

Also reduce your risk of downloading malware and viruses by installing anti-virus and ad-blocking software on all your devices.

We can help

Many of these potential actions should be made in the context of your entire wealth plan so that you’re prepared for 2023 and for the years ahead. Your J.P. Morgan team is ready to help you, your family and your team of professional advisors to find—and carry out—those actions that might serve you best.

¹ “Outlook 2023: See the potential,” J.P. Morgan, December 2022. 

² Ibid. 

³ Ibid.

⁴ B.J. Goergen, Global Head of The Philanthropy Centre at J.P. Morgan, and Sarah Brody, J.P. Morgan Donor-Advised Fund Specialist, “3 steps to making a philanthropic impact in volatile markets,” J.P. Morgan Private Bank, November 25, 2022.