Personal finance is one of those challenges that can plague you year after year. It’s easy for money to slip through your fingers while you’re not making any progress toward your financial goals without understanding why. So let’s fix that.
Make 2023 the year that changes everything – the year you finally get a solid handle on your finances. Get started by following these key steps.
1. Strategize Your Debt Payoff
Have you ever run the numbers on how much you’re paying each month on interest because of your debts? The average American pays up to an astonishing $8,037 every year, or $670 every month. That’s a serious chunk of change, and it goes straight into the pockets of your debtors ON TOP OF the amount you borrowed from them.
I warn you that this is going to hurt, but it’s well worth the pain: Make a list of all your debts, including credit cards, mortgages, student loans, vehicle loans, the whole nine yards. Note the balance and interest rate for each. Be sure to check whether any of them have penalties for early payoff as well (I know that doesn’t seem fair, but it’s the reality in some situations).
With all that information, you can prioritize which of those debts will save you the most money to pay off, then the next, then the next, and so on.
2. Create a Credit Score Improvement Plan
Your credit score is a crucial part of your finances. Not only will it impact your ability to do things like secure a home but it can cost you money because you’ll have higher interest rates on any financing you use if you have a poor credit score.
Take the time to first see where you stand with your credit and then make an improvement plan. Download your free credit report (which credit bureaus are legally required to provide every year). Look at the factors that are having the most impact on your credit score and create a plan to address each of them.
3. Use the Wonders of Technology
Technology has given us countless new tools to stay on top of personal finances. One of the top tools you can use is automation.
For example, set up automatic payments for your bills so you don’t forget to pay them and end up with late fees. If your bank offers automated deposits, as most do, set up an automatic deposit into your savings account each time your paycheck comes in. Taking advantage of features like these allows you to avoid unnecessary fees and work toward your goals without the temptation to spend your savings instead.
4. Create a Simple Goal Tracker for the Year
Sometimes it’s helpful and motivational to watch your progress toward your goals. You can do this with good old-fashioned pen and paper.
Establish your top financial goals for 2023, such as reaching a certain dollar amount in your savings account, paying off specific debts, and reaching a certain amount in your retirement account. Create a graphic for each one like a thermometer or bar that you can fill in each week or month to reflect your progress toward those goals. Seeing that progress can motivate you to keep going.
5. Invest Without Effort
You don’t have to be a financial mogul to make money from investments. Even investing small amounts can make a powerful difference.
The easiest way to do this is to use your employer’s 401(k) program if they offer one. If they offer matching contributions, investing in your 401(k) is taking advantage of free money. Even if your employer doesn’t match contributions, you still benefit by investing money before it is subject to income tax. Best of all, when you sign up for these programs, you’re investing money with every paycheck without thinking about it or without added effort on your part.
6. Investigate Each Expense for Savings
An important part of getting your finances under control is ensuring that you aren’t overpaying for your expenses. You can do this by making a list of your expenses and, throughout the year, going through them one by one to look for ways you can reduce them.
For example, find out whether refinancing your mortgage can save you money on interest. Shop around for lower rates on auto insurance, homeowners insurance, and so on. Reduce your gas costs by finding strategic ways to combine your errands or carpool.
Getting a Handle on Your Finances in 2023
Being in control of your personal finances is possible, and this can be the year that you make it happen. Use the steps above to make sure you’re using your money wisely and making progress toward goals that will benefit your financial wellness.