With 2022 drawing to a close, it’s time to reflect and begin afresh in the coming year. This is an opportunity to make some changes towards a better future. So what New Year resolutions do you have for 2023?
With rising interest rates and high inflation, safeguarding and growing your personal finances must be your financial resolutions for the New Year 2023. Improving your finances can go a long way in improving your overall wellbeing. It may reduce your worries and give you a feeling of security. As the new year represents a new beginning, it is a great opportunity to instill good financial habits.
To jumpstart 2023, here are the top 10 financial to-dos you must consider as part of your New Year resolutions:
1. Save more
Unsurprisingly, the top financial resolution is to save more money and luckily, there are so many ways to go about this: you can increase your 401(k) contributions and cut back on unnecessary spending. Choose carefully about where you’re putting your savings; it pays to keep your savings in a place it continues to grow, like a high-yield savings account or deposit, which usually have higher savings rates than regular savings accounts.
2. Improve credit score
If you have a low or average credit score, aim to increase it in 2023. You can improve your credit score by paying all your bills on time and in full, clearing off debts if any, limiting how many new accounts you open and spending responsibly with your credit card. Paying your full credit card balance helps improve your credit by reducing your utilization rate and reduces interest charges or fees that may result from carrying debt from month to month.
3. Create a personal budget
A clear budget can help you in tracking your spending and understanding where your money goes each month. Start by writing down all your fixed expenses, such as rent/mortgage, cell phone bills, groceries and savings. Then you can see how much money you have left for non-essential expenses, such as restaurants, entertainment and other wants. Set guidelines for what you can afford to spend and where you could cut back.
4. Pay off your debts in the New Year 2023
If you have credit card debt, 2023 could be a great time to start the process of repaying your debt as much as possible. You may consider consolidating the debts on a balance transfer credit card, which offers no interest for up to 21 months. If you’re working on paying down debt, pick up a side hustle to boost your monthly income and increase your monthly credit card payments to quickly eliminate your balance.
5. Check your credit score more often
Make a habit of checking your credit score more often to improve it. Now you can get an update on your credit score every month and discover the factors that influence your score. Some sites even show you the potential effect of certain actions, like missing a payment or paying off debt. There are numerous resources that allow you to check your credit score for free, such as Chase’s Credit Journey and CreditWise from Capital One.
6. Check your credit report more often
You must regularly check your credit report to check for any irregularities and spot fraud transactions early to ensure that only correct information is reported to the credit bureaus. This is important because incorrect information may directly affect your credit score and your eligibility for higher credit limits and lower interest rates.
7. Build an emergency fund
Establishing an emergency fund is a prudent idea to secure your financial stability and peace of mind. This fund is key to ensuring that if or when the unexpected happens, it won’t ruin the progress you’re making on your financial goals. Ideally, your emergency fund should be able to hold your regular household expenditures of at least 12 months, including EMIs. Saving 10%–12% of your monthly income can build a hefty emergency fund by the end of 2023.
8. Invest more in the New Year 2023
While the current economic conditions may make you wary of investing right now, jumping into the market in 2023 is the right thing to invest for the long term. Try to invest in diversified, proven assets like index mutual funds. With compound interest, your money will grow faster and faster over time, even if you make a rocky start and see low returns in the beginning.
9. Do a pension health check
As the cost of living rises, you may feel compelled to cut your pension contributions. However, you need to maintain sufficient savings for a secure retirement. Experts say that saving 5-10% of your gross income should be your target savings goal for retirement. If you are anticipating a raise in salary in the near future, or you got a hike in your pay at some point in 2022, consider increasing your 401(k) contribution and save more for retirement.
10. Look at the bigger picture
Don’t let your new year resolutions fade out after January; focus on the bigger picture. Get a comprehensive view of all of your finances, to map out your plan for 2023 and the future. Look at your monthly cash flow for the year ahead to better manage unexpected expenditure and budget shocks such as a fixed mortgage rate expiring. Be ready for any change in tax rules coming in April.
If you want to increase your income in line with inflation and fortify your personal finances against setbacks, these are the 10 financial goals to set and achieve in the coming year. Getting these done can build a better financial health and overall health for you in 2023 and beyond.