The new year comes with the chance to reflect on the past year and set new goals. However, don’t just set physical and mental wellness resolutions. You should also add financial wellness resolutions as well.
1. Revise Your Budget
Financial health starts and ends with a budget. With a budget, you can determine where your money goes each month, save, and pay off debt. However, you just can’t set and forget your budget. Therefore, it is essential to review your budget periodically to ensure it still suits your needs.For example, you may want to revisit your budget when starting a new job, moving into a new home, or having a child. But why wait until these events occur to assess your budget?
With that in mind, start the new year on the right foot by reviewing your budget. Specifically, take a look at your fixed and variable expenses, as well as your income. And it also wouldn’t hurt to set your financial priorities for the upcoming year.
2. Save More
A study conducted by Experian in 2021 found the number one financial resolution to be saving more money. Thankfully, you can accomplish this in several different ways. For example, consider increasing your 401(k) contributions, setting up automatic transfers to a high-yield savings account, and cutting back on unnecessary purchases—particularly during the holidays.3. Calculate Your Net Worth
The start of the new year is an excellent time to figure out what you’re worth financially. You need to calculate your net worth to assess your financial health and reach your goals.To figure out your net worth, subtract your total liabilities from your total assets. Assets include investments, savings, cash deposits, and equity in a house, car, or anything else you own.
Once you do this calculation, you’ll see what resolutions you need to make. Examining all your assets and liabilities can help you figure out where you should prioritize your current spending and saving and where you need to make changes.
4. Check in on Your Emergency Fund
Now’s the time to ensure you’ve got enough savings for a rainy day if you haven’t already. In case of unforeseen circumstances, an emergency fund can help you stick with your long-term investing plan. In case your employment situation changes, it can help you keep afloat. A cushion of three to six months of living expenses is often considered ideal.What if your emergency fund is non-existent at the start of the new year?
5. Improve Your Credit Score
Credit scores are a snapshot of your finances. More specifically, this is a three-digit number that shows how much you’ve borrowed and repaid. Creditors look at your score as a sign of trustworthiness.If you’ve got a high credit score, you’re more likely to be able to handle your finances and repay debt; if you’ve got a low score, you’re more risky. Conversely, if your score is low, you’ll have a higher interest rate and have a more challenging time getting credit.
- First, don’t take on any new debt or credit.
- You can keep track of upcoming payments and when they are due by setting up automated reminders.
- Consolidate any current debt you have.
- After you’ve gotten rid of or reduced most of your debts, establish better long-term habits. Paying your bills on time, having an emergency fund, and regularly checking your credit score are all good ideas.
6. Tackle Your High-Interest Debt
The stress of debt, particularly high-interest debt like credit cards, personal loans, and student loans, can be crippling. This might explain why 53 percent of Americans intend to pay off debt over the next year as part of their 2023 New Year’s resolutions, making it the most common financial resolution of the year.To get started, make a list of all your debts. From there, see if you can reallocate some of your spending to pay off your highest interest rate balances sooner. If you have any remaining debt, you can consider consolidating it, which might help you get a lower interest rate on a single loan by swapping varying interest rates on multiple loans, credit cards, or lines of credit.
In most cases, getting out of debt can take a long time. However, the sooner you focus on it, the more you’ll save. Getting rid of debt also frees up money for other important financial goals every month.
7. Reset Your Retirement Plans
Consider budgeting a set monthly amount for your retirement savings if you have a 401(k), 403(b), or 457 plan at work. Don’t forget about individual retirement accounts (IRAs), too, if you can.Employer Plans
You should contribute to your 401(k), 403(b), or 457 plan at work as much as you can comfortably afford, up to the maximum for the year. In addition to the regular contribution limits, if you’re 50 or older by Dec. 31, you can make extra catch-up contributions.It’s usually a good idea to contribute at least enough to your employer’s plan to earn any matching contributions.
IRAs
Whether a retirement plan at work covers you or not, you and your spouse can each contribute to a traditional IRA or Roth IRA, as long as your combined taxable wages and net self-employment income don’t fall below the maximum. In 2023, anyone age 50 or older can contribute an extra $1,000, bringing the total contribution to $7,500 or $625 per month. It’s up from $7,000, or $583 a month, in 2022.Annuities
If you’ve maxed out your other retirement contributions, you can optimize your retirement portfolio with an annuity.An annuity is a way to get a guaranteed retirement income without having to pay a lot upfront. After you buy an immediate annuity, you’ll start getting money between a month and a year later. The income will come later with deferred annuities.
Annuities can be a lifetime income source in addition to providing retirement income. Additionally, you can use the investment to supplement other investments that rise and fall.
Annuities also offer tax-deferred growth. This means you won’t have to pay taxes until you withdraw your gains.
8. Update Your Savings Goals
You might be tempted to make it easy for yourself to access your money. There is a risk, however. Money that is easily accessible will be spent. After all, money tends to burn a hole in one’s pocket.9. Review Your Life Insurance Policy
While insurance may feel like a necessary evil, it’s a crucial risk management tool. A life insurance policy and a disability insurance policy are essential to protect your loved ones and even yourself in the unfortunate event of your death or disability. Consult a licensed insurance agent or financial advisor to ensure you have the appropriate insurance coverage.Based on your previous medical expenses, compare multiple health insurance plans to determine which is best for you.
10. Put Your Health First
“Finances and health are nearly impossible to separate,” Kate Underwood writes in a previous Due article. “After all, health care costs money, and making money is much simpler when you’re healthy.”Perhaps you think you don’t have time to practice healthy habits such as a balanced diet, exercise, or adequate sleep. However, in light of the many financial benefits of focusing on your health, you may change your mind.
It has been estimated that medical reasons account for two-thirds of bankruptcy filings in the United States. Regardless of whether the statistics are accurate, medical costs can be really tough for most families. So, in short, a healthy lifestyle can save you a lot of money in the long run.
- Aim for seven to eight uninterrupted hours of sleep per night.
- Exercise for 150 minutes a week—or 75 minutes of vigorous activity, or a combination of both.
- Consume a variety of vitamins and nutrient-rich foods.
11. Invest in What Matters Most to You
According to Morgan Stanley’s 2022 Investor Pulse Poll, 71 percent of respondents said they want their portfolio to align with their values, beliefs, and issues that matter to them. But only 44 percent said it’s happening. Furthermore, 66 percent of respondents said they wanted diversity, equity, and inclusion policies in companies they invest in.12. Get Your Taxes Done Early
“Money is a major source of stress on people, and what tax season does is shine a great big spotlight on the issue,” Michael McKee, a Cleveland Clinic psychologist and president of the U.S. branch of the International Stress Management Association, tells WebMD. “Money takes center stage at tax time, even if you might have been able to push it to the wings the rest of the year.”FAQs
#1 What Do You Do to Keep Your Financial Resolutions?
Make realistic goals and remind yourself why you made the resolution when you’re tempted to quit. Having part of your paycheck automatically deposited into a savings account or transferring money from your checking account to a separate saving or investment account can also help.#2 What Is the Maximum Amount of Money I Can Set Aside Each Month?
Each person’s circumstances are different. However, it should become more apparent how much you can reasonably set aside once you work out how much you have coming in.#3 Is Your Emergency Fund Sufficient?
Experts recommend keeping three to six months’ worth of living expenses in your emergency fund. However, many factors can affect this, including:- The type of lifestyle you lead
- Your area’s cost of living
- The stability of your income and your job in the long run
- Job opportunities in your field
- Affordability of health insurance
#4 Is There a Reliable Way to Pay Off Debt?
You can get rid of debt most easily by not spending more than you can afford. If you do this, you’ll be able to pay your bills on time each month, and you won’t accumulate interest on overdue balances.#5 Are You Ever Done Saving?
To put it simply, no.You should have enough in your savings account to cover regular but not unexpected expenses like home and vehicle maintenance, vacations, and gifts. In addition to everyday savings, you should have enough to cover acute emergencies, like changing your car’s tires. While you can’t always predict when these things will happen, you should still plan for them.
