One in three Americans are planning to make finance-related New Year’s resolutions for 2023, according to a new WalletHub survey. For example, 31 percent of people making a financial resolution want to save money. To help you make the most of this opportunity for reflection and self-improvement, we put together a list of the top financial New Year’s resolutions for 2023, plus a playbook for making them a reality.
Save More Money: Almost half of Americans do not have a rainy-day fund, according to the Financial Industry Regulatory Authority. Like someone without insurance, people who lack an emergency fund are tempting fate, putting themselves at risk of financial catastrophe in the event of unexpected unemployment or major medical expenses. A lot of people found that out the hard way over the past couple years.
So, building up some reserves should be one of the first orders of business for any financial makeover. We recommend ultimately building a fund with about 12 to 18 months’ take-home income. But it’s important to understand that won’t happen overnight. In other words, you don’t need to put the rest of your financial life on hold until your emergency fund is complete. Rather, chip away at it over time.
Repay 20 Percent Of Your Credit Card Debt: Americans owe way too much credit card debt. That debt is extremely expensive, too. Something eventually has to give. And you’d much rather that be your outstanding balance, paid down on your own terms, than your ability to afford monthly minimum payments and, in turn, your credit score. So it’s time to get serious about getting out of credit card debt.
Some of the other steps mentioned here – including budgeting, automation and the Island Approach – will help in terms of reducing your future reliance on debt. But the problem of what to do about existing balances still remains. The answer for people with at least “good” credit is the combination of a 0 percent balance transfer credit card and a credit card calculator, which has the potential help you save hundreds of dollars while getting out of debt months sooner than you would otherwise.
Improve Your WalletScore: Your WalletScore is like your credit score, but it grades your finances overall. In addition to your credit history, your WalletScore evaluates areas such as your spending habits, emergency preparedness and retirement planning to give you a holistic understanding of your financial strengths and weaknesses.
You can check your WalletScore for free on WalletHub and get your personalized improvement plan. All you have to do is follow the recommendations, and your finances will be in better shape.
Fight Back Against Inflation: After months of heightened inflation, goods cost more, portions are smaller and bank accounts are depleted. Fortunately, there are steps you can take to reduce the impact of inflation on your bottom line.
For starters, you can look into moving your money to a high-yield bank account. The average checking account from a national bank yields just 0.1 percent, according to WalletHub’s latest Banking Landscape Report. In contrast, the best online checking accounts yield up to 5 percent.
In addition, you could save 5 percent at your favorite retailers by getting their store credit cards. Most store credit cards require just fair credit for approval and have $0 annual fees, and the best cards give up to 5 percent back on every purchase. You can start by applying for the card affiliated with the retailer you spend the most money at, then wait at least a few months before applying again.
Make A Realistic Budget And Stick To It: The best way to make a budget is to gather your bills from the past few months and make a list of all your recurring expenses. Then rank them in order of importance, with true necessities such as housing, food and healthcare obviously taking the top spots. After that, you can simply cut from the bottom of your list until your take-home exceeds what you plan to spend. Finally, keep track of your monthly spending throughout the year to make sure you’re abiding by your budget.
Pay Bills Right After Receiving Your Paycheck: Taking care of monthly obligations before letting yourself indulge in any luxury expenses is a helpful budgeting strategy. It gives you a better sense of what you can truly afford and what you can’t. It also helps you avoid ever having a late payment reported to the major credit bureaus, which is one of the easiest ways to damage your credit score. Furthermore, paying your bill early improves your credit utilization, and thus your credit score, by reducing the balance listed on your monthly statement.
We recommend setting up two automatic monthly payments from a deposit account: one for right after payday and another for a couple days before your monthly due date. The second payment will help you avoid interest on any purchases made between your first payment and the end of your billing period.
Use Different Credit Cards For Everyday Purchases And Debt: The Island Approach involves using different accounts to serve different financial needs, as if they are a chain of islands. The most basic example is using a rewards credit card for everyday purchases and a 0 percent APR card for balances that you’ll carry from month to month.
Doing so enables you to get the best possible terms on each card, rather than settling for average terms on a single card. It will also help you reduce the cost of your debt, considering everyday purchases won’t be inflating your average daily balance. And if you ever incur interest on your everyday card, you’ll know you spent too much that month.
Get An A In Financial Literacy: Financial literacy levels in this country are far too low, and they’re headed in the wrong direction. So, start 2023 by taking our WalletLiteracy Quiz and getting a baseline score. Then, throughout the year, study the areas where you struggled and periodically re-test yourself to gauge your progress. Your goal should be to get at least an A- by the time 2023 rolls around.
Sign Up For Credit Monitoring: Thanks to the increased availability of free credit scores, most people have a good sense of their credit standing these days. Too few of us are familiar with the actual contents of our credit reports, though. That might be because we assume our credit scores tell the full story, but that’s just not the case.
For starters, as many as one in four people have an error on their report that could affect their credit score, according to research by the Federal Trade Commission.
Make Sure You Have Enough Insurance: The past year has shown just how fragile and precious life is. And if other people depend on you, the last 12 months should illustrate the importance of making sure those people are taken care of, even if you’re not around or able to work. In particular, that means taking steps such as purchasing life insurance and disability insurance, in addition to making sure you have enough health insurance coverage. Hopefully, your family won’t need to file any claims for a very long time, but it’s better to be prepared.
Focus On Physical Health: There is a clear connection between physical, emotional and financial health, and it was particularly apparent in 2022. For starters, the average person spends about $12,530 on health care each year. Inflation and the economy are also our biggest sources of stress, according to the American Psychological Association. And people who get regular exercise tend to have better credit scores.
This underscores the importance of getting your financial house in order as well as exercising regularly and engaging in other healthy practices aimed at reducing health care costs. It won’t be easy, but this is one resolution that will certainly pay dividends in multiple areas of your life.
Look for a Better Job: Sometimes, we get so caught up in spending less and saving more that we forget to address the other side of the equation: how much we earn. But the benefits of finding a higher-paying job could actually end up outweighing everything else put together.