One in three Americans plan to make finance-related New Year’s resolutions for 2023, according to a new WalletHub survey. For example, 31% of people making a financial resolution want to save money. To help you make the most of this opportunity for self-reflection and self-improvement, we’ve compiled a list of the best New Year’s financial resolutions for 2023, along with a guide to making them a reality.
Save more money: Nearly half of Americans don’t have a rainy day fund, according to the Financial Industry Regulatory Authority. Like someone without insurance, people without an emergency fund are tempting fate, exposing themselves to the risk of financial catastrophe in the event of unexpected unemployment or large medical bills. A lot of people have found out the hard way over the past couple of years.
Thus, building up reserves should be one of the first orders of the day for any financial overhaul. We ultimately recommend building a fund with around 12-18 months of net income. But it is important to understand that this will not happen overnight. In other words, you don’t have to put the rest of your financial life on hold until your emergency fund is full. Instead, reduce it over time.
Pay off 20% of your credit card debt: Americans owe way too much credit card debt. This debt is also extremely costly. Something must eventually give way. And you’d much rather have it be your outstanding balance, paid off on your own terms, than your ability to afford minimum monthly payments and, therefore, your credit score. So it’s time to take credit card debt seriously.
Some of the other steps mentioned here — including budgeting, automation, and the island approach — will help reduce your future reliance on debt. But the problem of what to do with existing balances remains. The answer for people with at least “good” credit is the combination of a 0% balance transfer credit card and a credit card calculator, which can help you save hundreds of dollars while by getting out of debt months earlier than you would otherwise.
Improve your WalletScore: Your WalletScore is like your credit score, but it assesses your finances as a whole. In addition to your credit history, your WalletScore assesses areas such as your spending habits, emergency preparedness, and retirement planning to give you an overall understanding of your financial strengths and weaknesses.
You can view your WalletScore for free on WalletHub and get your personalized improvement plan. Just follow the recommendations and your finances will be in better shape.
Fighting Inflation: After months of increased 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.
To start, you can consider transferring your money to a high-yield bank account. The average national bank checking account earns just 0.1%, according to WalletHub’s latest banking landscape report. In contrast, the best online checking accounts earn up to 5%.
Plus, you could save 5% at your favorite retailers by getting their store credit cards. Most store credit cards only require fair credit for approval and have a $0 annual fee, and the best cards give up to 5% back on every purchase. You can start by applying for the affiliate card from the merchant where you spend the most money, then wait at least a few months before reapplying.
Make a realistic budget and stick to it: The best way to make a budget is to collect your bills from the last few months and make a list of all your recurring expenses. Then rank them in order of importance, with the real necessities such as housing, food and health care obviously taking the first places. After that, you can simply trim from the bottom of your list until your income exceeds what you plan to spend. Finally, track your monthly expenses throughout the year to make sure you’re sticking to your budget.
Pay your bills right after you get your paycheck: Taking care of your monthly obligations before indulging in luxuries is a helpful budgeting strategy. This gives you a better idea of what you can really afford and what you can’t. It also helps you avoid reporting a late payment to major credit bureaus, which is one of the easiest ways to hurt your credit score. Plus, paying your bill early improves your credit utilization, and therefore your credit score, by reducing the balance shown on your monthly statement.
We recommend setting up two automatic monthly payments from a deposit account: one right after payday and another a few days before your monthly due date. The second payment will help you avoid interest on purchases made between your first payment and the end of your billing period.
Using different credit cards for everyday purchases and debts: The island approach involves using different accounts to meet different financial needs, as if it were a chain of islands. The simplest example is to use a rewards credit card for everyday purchases and a 0% APR card for balances you’ll keep month-to-month.
This allows you to get the best possible conditions on each map, rather than settling for average conditions on a single map. It will also help you reduce the cost of your debt, since daily purchases will not inflate your average daily balance. And if you ever incur interest on your everyday card, you’ll know you overspent that month.
Get an A in Financial Literacy: Financial literacy levels in this country are way too low, and they’re headed in the wrong direction. So start 2023 by taking our WalletLiteracy quiz and earning a baseline score. Then, throughout the year, study the areas where you struggled and periodically test yourself to assess your progress. Your goal should be to get at least an A- by 2023.
Sign up for credit monitoring: With the increased availability of free credit scores, most people have a good idea of their creditworthiness these days. However, too few of us know the actual content of our credit reports. Maybe it’s because we assume our credit scores tell the whole 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 rating, according to a Federal Trade Commission study.
Make sure you have enough confidence: The past year has shown how fragile and precious life is. And if other people are dependent on you, the last 12 months should illustrate the importance of making sure those people are taken care of, even if you are not there or unable to work. This includes taking steps such as purchasing life insurance and disability insurance, in addition to ensuring you have sufficient health insurance coverage. Hopefully your family won’t need to file claims for very long, but it pays to be prepared.
Focus on physical health: There is a clear connection between physical, emotional, and financial health, and this was especially apparent in 2022. For starters, the average person spends about $12,530 on health care each year. Inflation and the economy are also our main sources of stress, according to the American Psychological Association. And people who exercise regularly tend to have better credit scores.
This underscores the importance of getting your finances in order as well as exercising regularly and adopting other healthy practices aimed at reducing healthcare costs. It won’t be easy, but it’s a resolution that will definitely pay dividends in many 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 better-paying job may actually end up outweighing everything else put together.