6 easy financial New Year’s resolutions
It’s the start of a new year, and in keeping with tradition, it’s an ideal time to turn over a new leaf that will lead to positive change. Millions of people will resolve to lose weight, get organized, quit smoking, or spend more time with family.
Right in the middle of the most popular New Year’s resolution pack is financial fitness—in other words, save more, spend less. But, let’s face it. With the glow of the holiday season fading fast and the inevitable arrival of last month’s bills arriving in your mailbox, it’s an admirable goal, but a tough challenge.
Like exercising, though, financial health is something you need to visit every day. It’s not a one-and-done achievement. So, in the spirit of the resolution season, here are six easy financial resolutions you can set and keep in 2023:
1. Organize your finances
Before you can make any changes, you need to organize your finances. Use a spreadsheet to record your assets and liabilities including your home, car, savings and investment accounts, insurance policies, revolving credit, automated subscriptions, services like pest control, lawn maintenance, TV, internet, and phone charges…and anything else that involves money coming in or going out the door.
Now, what do you need and what can you do without? Talk with your insurance agent to make sure you have enough—or if you have too much—home or car insurance. Can you find a more reasonable internet/phone provider? Is your dental plan worth renewing or should you downgrade your medical coverage? Can you mow your own lawn? Is your Amazon Prime membership worth the annual cost?
Yes, it’ll take time, but knowing how much money you have, where it goes, and what value it brings will be the basis for almost every other financial decision you make this year.
2. Build up your emergency fund
An emergency fund is like insurance. You may not need to use it any time soon, but it’ll save your financial life if you do. You could be living comfortably at the moment, but whether it’s an unexpected home repair, sudden job loss, or large medical expense, it can cripple your financial stability. Start by saving a few dollars a week and keep building until you have at least three months of living expenses. And just so we’re clear, replacing your standard TV with a 65” flat screen does not qualify as a home repair. Just sayin’.
3. Create and stick to a budget
The old “stick-to-a-budget” advice is an extremely common financial resolution. But listen: the number of Americans who spend their hard-earned money without a budget in mind is astronomical, and it’s a big reason our finances are a major source of worry and concern.
Believe us, we know. In the beginning, budgets are tough. You’re used to whipping out a credit card at Starbucks, buying the newest technology because it’s cool, or spending money on your designer shoe habit. If those things are important to you, you don’t necessarily have to do without them—just budget for them.
A budget realistically balances your earnings with your spending, saving, and investment goals. It helps you avoid overspending, allows you to live within your means, and alleviates financial stress and worry.
When you’re aware of how much money is available, you’re able to make smarter financial decisions that lead to a much happier life. And we all want that, don’t we?
4. Pay down your debt
Life is expensive—you need certain things, everyone has it, so some amount of debt must be fine. Debt can be used for good, like when you need a mortgage, but, it can also spiral out of control.
Revolving debt that continues month after month after month can be detrimental to your financial health and could hinder any financial progress, whether it’s your emergency savings, investments, your mortgage, retirement, or even saving for a vacation.
Be diligent about paying it down every single month and track your progress. It may not be gone by the end of the year, but if you’re committed, you’ll not only make a significant dent, but you’ll be able to sleep a little better at night.
5. Stop buying stuff you don’t need
Selling your unnecessary or no longer used stuff is one way to recoup a small amount of what you’ve spent on these things, but the best way to regain that money is to avoid buying it altogether.
Do less shopping and more relaxing. Use that time for more constructive efforts, like investing it in a hobby or spending more time with friends. The next time you find yourself ready to make a purchase, ask yourself how often you’ll use it.
Impulse buying is an all-too-easy way to put a major dent in your budget—especially with thousands of items available online at our fingertips. Next time you find yourself impulsively adding items to your online shopping cart, wait 72 hours. If you find yourself still fawning over that new top or latest electronic after 72 hours has passed, then you can treat yourself (if you have room in your budget, of course).
6. Create an additional income stream
Any side hustle can help you pay down debt, increase savings, build your investment portfolio, or even retire at an earlier age. Turn a hobby into a small business, turn your talent into freelancing, sell your stuff on eBay, or list your creativity on Etsy.
Find something you love and figure out how to make money doing it. Be a personal shopper, a babysitter, or a handyman on weekends. One caution, though. Don’t sacrifice your performance at your full-time job, and be careful to balance your work and home life. Making extra money should be a bonus, not a dreaded chore.
It’s not an all-or-nothing mentality
Resolutions aren’t easy to keep. In fact, more than 80% of people give up by February, and we can understand that. When you set unreasonable expectations, the first sign of failure offers you the permission you need to return to your old habits. Each of these financial resolutions, though, is a work-in-progress. Did you this week’s emergency fund deposit on a Starbucks run for the office? Splurged on some after-Christmas shoe sale? Don’t give up—simply get back on track. Practice makes perfect, and one misstep doesn’t mean it’s all over.
Make the commitment, work on getting your finances in order, and 2023 will be a stellar year!