TFP #020: 4 Steps To Kickstart Your Finances For 2023

Read time: 4 minutes

Welcome to the 20th edition of the Tech Financial Planning (TFP) newsletter.

We are back after a holiday break!

As we start 2023, finances are on people’s minds

In this newsletter we’ll break down 4 simple steps you can take to start 2023 off right.

TL;DR

  • Take stock of the year ahead and whether you have any new goals that will affect your plan

  • The beginning of the year is an excellent time to plan for your 2023 cash flow

  • Take some time to figure out your strategy for your equity comp, particularly if you have stock options

  • Make sure you’re ready for tax season

Goals and The Year Ahead

Before we get tactical, first things first.

As we look at 2023 and the coming year(s), have your goals changed? 

Remember, your goals determine your plan, and your plan determines your portfolio.

If your goals have changed, then you need to make changes to your plan and your portfolio.

For example, let’s say you want to buy a house this year, but your money is all invested, particularly a big chunk in company stock.

You want to put a strategy in place to create cash for your eventual down payment.

And yes, that probably means selling some stock (but that’s ok, because you are going to buy a house!).

For Carly and me, we have a lot of travel and weddings this year.

So we need to make sure we have cash ready for higher expenses, particularly in the second half of the year.

Plan for cash flow

I talk a lot about planning for your cash flow, and that’s doubly true at the beginning of the year.

Here’s a hypothetical visualization of what this looks like

Here’s a couple quick tips

  • Look at your income for the year

    • Changing comp structure?

    • Potentially changing jobs?

    • Any bonuses / raises?

    • How many RSUs vesting?

    • Real estate income?

  • From there, map out how this money will be used

    • What will go to taxes

    • Education

    • Living expenses

    • Travel

    • Rent/mortgage

    • Debt

    • Insurance

    • Other big expenses

    • Giving

  • Put together your saving / investing plan. Potential options include

    • Emergency fund

    • 401k

    • Roth IRA

    • ESPP

    • Purchasing stock options

    • Taxable (flexible) brokerage account

The key is to automate as much as you possibly can.

If compound interest is the 8th wonder of the world, then automation is the 9th.

Equity Comp

What is your plan for your equity comp for the year ahead?

If you have RSUs, do you know how many, and when they are vesting?

If you have an ESPP, are you going to contribute? When do you receive the shares?

Do you plan to sell some and diversify, or hold them all?

For stock options, I’d ask similar questions with one important note.

Now could be a great time to exercise some.

Here’s why:

1/ More time to plan

Exercising your stock options early in the year gives you more time to plan for the potential financial impact.

For example, if you exercise now, you have 12+ months before next tax season.

As opposed to exercising Dec 31, where you'd only have 3 months.

2/ Many private companies have repriced their options.

Carta found that “with private valuations trending down, more companies are lowering the price of their options to make them more appealing to employees."

Granted, this only makes sense if a) you believe in the company and b) it’s part of your plan to exercise early.

But this is why it makes sense to start planning now before exercising at random throughout the year.

And remember, make sure you have someone double check your assumptions.

I've seen way too many get surprised by massive tax bills.

If you don't have someone in your corner, I'd be happy to chat.

Estimated Taxes

Which leads us into our last step.

Don’t get a big surprise come April!

Make sure you have an idea of where you stand.

At it’s core, it’s looking at your income for the previous year and the total tax you will have to pay versus the amount you’ve already paid, either through your company withholdings or estimated taxes.

If there’s a big discrepancy between the two, be ready to pay the bill!

For clients, we can run tax projections for them to make sure they are on track.

But there are some really great DIY tools out there, like Turbo Tax’s Tax Calculator or HR Block’s estimator.

If you want to go way more in depth, Andre Nader has a great article on this topic, including his process

Putting It All Together

There you have it.

4 tangible, quick steps you can take to start your finances off right for 2023.

If you can spend a little bit of time now to dial your plan in, you will set yourself up really well.

And if this all seems overwhelming or you’d like some help, we are looking to bring on 2 new clients for February.

Book your Get To Know meeting here

I’m excited for 2023.

Thanks for being a part of this journey with us.

We appreciate you.

Whenever you're ready, there are 3 ways I can help you:

1. Connect with me on LinkedIn, where I post every weekday (unless I’m on vacation). https://www.linkedin.com/in/marshalljoe/

2. Subscribe to the “Tech Financial Planning” newsletter to get equity comp and financial planning strategies in your inbox every Saturday. It’s free: TFP Newsletter

3. Want one on one help? Schedule your Get To Know meeting