After a year like 2022, you might be focusing on your financial health in 2023. You wouldn’t be the only one — 81% of Americans surveyed by The Fool say they’re making financial New Year’s Resolutions.
Saving up for big purchases and paying off debt are the big ones, but you might use the new year to set other financial goals. Whatever they wind up being, these financial tips can help anyone commit to smart money habits in 2023.
Table of Contents
1. Start a Budget
Any successful budget balances your spending, ensuring you can spread your cash between the essentials, fun splurges, and savings.
Fun splurges are usually where most people trip up. They can accidentally spend too much on frills and have no money left over to put towards savings or debt.
According to the percentage budget method, you should spend 30% of your income on fun things, although you may need to spend less if your essentials take up a bigger piece of the pie. Roughly 50% of your income is for bills and essentials — note that the minimum payments on loans and lines of credit fall under this category — and 20% for savings.
2. Establish or Rebuild an Emergency Fund
An emergency fund is something everyone needs, even if it isn’t one of your resolutions this year. It gives you the cash to cover an expense you weren’t planning for in unpredictable situations, like getting sick and having to pay for tests and hospital parking.
Without an emergency fund, you might have to put other goals on pause to cover unexpected medical expenses. You might even have to take out a loan or line of credit. A CC Flow Line of Credit may be an option in these emergencies, as it’s designed to be a safety net for savings.
Generally speaking, you should have three to six months of living expenses sitting in an account for the unknown. However, you can use this calculator to find out how much money you should set aside for emergencies.
3. Put Your Savings in a High-Yield Account
With luck, your emergency fund will sit untouched for months or even years to come. That gives it time to earn interest, which helps grow your wealth. Switch to a high-yield account to maximize your annual yield rate and earn as much as possible on your savings.
4. Automate Savings and Payments
Saving is easier when you don’t have to think about it. The same goes for regular bills that arrive like clockwork. You can arrange for your bank to pay these regular expenses automatically, so you never miss a due date or contribution.
5. Learn More About Your Debts
If you plan on paying off debt in 2023, it’s important to understand how your loans work.
Most financial institutions will encourage their borrowers to make early or additional payments. However, some will charge fees for any payment you make outside your scheduled minimum payment.
You can usually find this information in the contract you signed when you received your loan or line of credit. If they charge a fee, you’ll have to crunch the numbers if paying off your loan or line of credit early is worth these additional charges.
If there is no fee, you can make as many extra payments as you like. You can see how quickly these payments will pay off what you owe using this debt calculator.
Good Luck!
Follow these tips if you plan on tackling your finances in the months ahead. They’ll help you stay on track all year long.