New Year, New Financial Habits
Inflation may be cooling off for now, but prices remain high. As we near ushering in the New Year, it’s a great time to examine personal finances and set new spending rules. People make resolutions every year to work out more, be healthier, or learn something new. It’s the “new year, new me” mentality, but you can make the same changes that you’re looking for in yourself – in your bank account.
Why Focus on Finances as a Resolution for 2023?
Looking back on 2022, the most recent update released on December 13 shows that the annual inflation for the U.S. was just over 7% for the 12 months ending in November 2022. Everyone felt the strain of higher costs, from groceries to gas to services. Resolve to put the money you lost last year back in your pocket this year.
Making small changes that can help build your savings slowly and steadily significantly impacts your finances in the long run.
Financial Resolutions for 2023
Prioritize saving. Set up automated transfers to your savings account every month or every payday. Consistency is critical to reaching your goals, so don’t stop or decrease this amount if possible.
Track spending. Every dollar should be accounted for. Log all your expenses and purchases – every coffee, bag of chips, tank of gas, you name it. When you keep track of your purchases, big or small, you’ll see the real impact it has on your bottom line. You can do this by logging your expenses or using an app that helps you easily plug in purchases.
Pay bills on time and in full. It’s easier to spend more when you can delay paying it back. You won't be as tempted to keep spending if you hold yourself accountable to pay your credit balance in full every month. Better yet, pay each charge as you go. Some credit cards offer a quick “pay now” feature for each charge, or you can pay for the item charged as it shows up in your balance.
If your credit card balance is too high to pay off monthly, add extra money to your payment monthly to chip away at the debt. You may want to refrain from using your credit card to avoid increasing the balance from additional charges. While paying down your balance, you’ll also improve your credit score.
Start retirement savings now. It’s easy to put off saving for retirement when it’s 30, 40, or 50 years down the road. Contributing even a small amount consistently over 30 years or more will significantly impact your retirement savings through compound interest, and it’s far better than not contributing. Resolve to make retirement savings a priority for 2023.Focus on the difference between “can” and “should.” The question we ask ourselves when facing a big purchase or even an impulse purchase is, “Can I buy this?” In other words, can I afford it? Do I have enough money? Often, the answer is yes. But in 2023, challenge yourself to change the question to, “Should I buy this?” This simple shift will force you to step back and re-evaluate the situation. Will this purchase hinder your ability to save for something more important? For example, should I buy this new car when my other one works fine, and I want to buy a house next year? It’s important to think about the big picture.