Financial New Year’s Resolutions

The start of a new year is always an exciting time. After the holiday season has wound down, the presents have been put away, and the last of the extended family has gone home, many of us are left reflecting on what the past year brought and what we hope to get out of the year to come. 

This is especially true when it comes to our finances. Budgets can often be derailed by the traveling, gift-giving, and entertaining costs of the past few months. For some, the start of the new year can also mean new debt that follows us into 2023.

Whether you’re finding yourself in a tough spot after recent spending or simply want this next year to be your most successful one yet, here are our top picks for financial New Year’s resolutions… and how to keep them going strong all year long.

Set (and stick with) a budget

As simple as it sounds, the value of a solid budget cannot be understated. Whether you make $30,000 a year or $30 million, setting and following a budget ensures that you are spending within your means, enables you to meet your personal financial goals, and gives you peace of mind that you’re financially secure.

Go over your spending and income from 2022, looking at what worked and what didn’t. Think about your goals for this year, then use all of that information to create a budget for 2023. Your budget can follow many different systems — the 50/30/20 plan, the envelope method, the zero-sum method — but at the end of the day, the one that works best for you is the one you’ll actually follow through with. 

Reduce your spending

Let’s be honest for a moment: nearly all of us could stand to reduce our spending at least a little bit, and in at least one or two categories. Perhaps you go to the grocery store without a budget (or on an empty stomach), and have a tendency to overbuy snacks. Maybe you fall victim to social media ads for fun products that you don’t really need, or you and your family go out to eat way too often.

Whatever the source or reason for your overspend, devote a little time to identifying these trouble spots in your budget. Then, fix them for the next year, and find somewhere else to better allocate those funds.

Increase your earnings

The next best way to keep more money in your pocket this year is to simply make more of it. Easier said than done, in some cases, but you have the whole year ahead of you to strategize.

Depending on your situation, you could:

• Ask your boss for a well-earned raise and/or promotion.

• Take on additional hours at work.

• Start a side hustle in your spare time.

• Find ways to declutter by selling things in your home that you don’t need.

• Start looking around for new job opportunities that offer more money.

Make a plan to pay off debt

A recent study found that more than 10% of respondents are still paying off their holiday debt… from 2021. Add in last year’s inflation and normal holiday spending habits, and it stands to reason that many households are carrying around significant balances from seasonal spending alone — and that’s before you even consider the typical debt burden for American consumers.

Rather than continuing that stressful cycle, make 2023 the year that you set a plan in motion for becoming debt-free. Some things that might help:

• Learn about the debt avalanche and debt snowball methods, and see which could benefit your situation the most.

• Consider taking out a personal loan to effectively refinance high-interest balances, like credit cards.

• Look into utilizing your home’s equity with a HELOC or home equity loan, to pay off existing debt for less.

Analyze recurring expenses

Some of the biggest financial waste in our lives comes from automated and recurring expenses. So use this month to go through each one and see how you can reduce costs.

This means looking at:

• Monthly subscriptions to services or products that you don’t actually use anymore.

• Auto insurance premiums to see if your carrier can offer a better rate (or if you’re better off switching to another provider).

• Bills that can be negotiated or adjusted, like your cell phone or cable services. 

Sometimes, a phone call is all that’s needed to trim down your bill. For instance, your cable company may offer a retention discount of $20/mo, which would save you $240 each year… just for calling. 

Build your credit

The better your credit, the easier your financial life can be. That’s because your credit score affects not only the interest rates you’re offered (saving you money in the long run) but also the type of products and services available to you in the first place.

With a healthy credit history, you may be able to snag better terms on loans, approval for the credit cards and loans you need, and even lower premiums on your auto insurance policy. While building and improving your credit can take time, you can start by:

• Checking through all three of your credit reports (you get one free each year from each bureau), looking for any errors or discrepancies

• Paying down balances to improve your credit utilization

• Requesting credit limit increases on your existing cards (which also improves your utilization ratio)

• Making payments on time each and every month

• Using a monitoring platform or credit-building loan (like Credit Builder from MoneyLion) to boost your score sooner

Spend less on your debt

Getting out of debt can take months or years, so be sure you’re spending as little as you can on those balances along the way.

Look into refinancing your debt into a lower interest rate with the help of a personal loan or HELOC. Consider how much you could save with 0% APR balance transfer offers from new credit cards. And avoid incurring any late fees on future payments, or downgrade existing credit cards to avoid unnecessary annual fees on accounts you don’t actively use anymore. 

Simplify your accounts

Juggling multiple accounts — each with their own due dates and payment requirements — can be exhausting, and often leads to missed payments (and late fees!). Instead, consider consolidating multiple balances into one with the help of a personal loan.

Consolidating will not only simplify the process, giving you one due date and payment to track, but also allows you to lock in a lower interest rate on your debt. 

Plan for the future

This is a great time to think about your long-term goals, as well. Here are some questions to ask yourself when deciding where your focus should be:

• What are your retirement plans and are you on track with your savings efforts? It’s never too early to start.

• Are you maximizing “free money” available to you, such as an employer match on 401(k) contributions?

• Do you have an adequate emergency fund and, if not, how can you begin to build one?  

Automate what you can

Automation takes just moments to set up, but can save you time and energy over the course of the year. 

Some things you can schedule include:

• Recurring monthly bills (many companies will even offer discounts for signing up for autopay!)

• Automatic transfers into a dedicated savings account

• Recurring investments (such as auto-investment with a MoneyLion managed portfolio)

Get prepared

Now that the end-of-year chaos has calmed, check in with yourself regarding your family’s financial security, and whether you’re prepared for anything that lies ahead.

This might mean finally buying life insurance, or checking that an existing policy still meets your loved ones’ needs. Or it could mean creating an ICE (In Case of Emergency) folder for your spouse or children, which would include copies of important financial documents and accounts if you were suddenly incapacitated. 

Teach your kids early

There’s no such thing as “too early” when it comes to teaching your children about their financial wellness. 

Whether it’s using an allowance to teach your kids the power of a dollar, setting up a Roth IRA for your teenager, or involving older kids in your tax preparation in the spring, be sure to keep the lines of communication open when it comes to money. Teaching your kids to plan for the future and respect their finances is a great way to get them started on the right foot. 

Start planning for the next holiday season

I know, I know, you probably don’t even want to think about the holidays yet, let alone start planning for them. But the sooner you begin, the easier your 2023 holiday spending will be. 

Calculate what you spent this past holiday season between travel, gift, events, decorations, and meals with family. Divide that by 12, and you have your monthly savings target between now and the end of the year. If you start tucking away those funds today, you won’t feel the pinch come winter.

Each new year is a wonderful new opportunity to assess our habits and situation, and make changes moving forward. Where do you want to be this time next year, and how can you best ensure that you get there?