The start of a new year means New Year’s resolutions, which often include financial goals. Of course, coming up with a New Year’s resolution is a whole lot easier than sticking to it.
But it doesn’t have to be impossible, especially with the right steps. If you want to improve your finances in 2023, we’ll look at how you can set yourself up for success in the new year. More importantly, we’ll focus on the steps you’ll be able to stick to without too much difficulty.
Invest In Tax-Advantaged Accounts
There are many ways to lower the tax bill on your investments, but people often don’t take full advantage of the tax-advantaged accounts available to them. For example, are you investing in a Roth IRA for tax-free growth? Perhaps your employer offers a 457 plan, which allows penalty-free withdrawals before 59 ½. If you work for a large employer, ask your benefits office for information about retirement plans. You might find they offer investments of which you weren’t aware.
Save Money in High-Yield Vehicles
Saving money is important, whether you are saving for emergencies or saving to go on a cruise. The problem is that leaving your money in a checking account might be doing you a disservice. This is because checking accounts typically don’t earn much interest. The problem is especially acute when inflation is high.
Fortunately, there are many options available to earn more interest. For short-term savings, high-yield savings accounts are always a solid option. You can consider vehicles like CDs and I bonds if you don’t need the money for at least a year. These investments likely won’t perform as well as the stock market when the economy is strong, but the downside risk is also much lower.
Attack Debt With a High APR
The flip side of saving money in high-yield savings vehicles is to attack any debt that has a high APR. This way, you earn more and also pay less. For millions of Americans, credit cards are the low-hanging fruit. They usually have a double-digit APR, so you’ll pay a substantial amount if you carry a significant balance.
First, make sure you have an automatic payment on your credit card, even if it’s for just the minimum amount. Then, pay as much as you can toward the balance each month. Alternatively, you can use a balance transfer card, which can have an APR as low as 0%, and then you’ll work to pay off the balance without racking up interest. You could save hundreds of dollars if the balance transfer card has no membership fee.
Check Your Budget
Budgeting is always important, but revisiting it every now and then can be helpful. If you already have a budget, spend a few minutes reviewing it and seeing where your money is going. Are you spending more than you think you should in one area?
“Look for areas where you can cut back on your spending,” said Mina Tadrus, CEO of Tadrus Capital. “This could include things like eating out less, canceling subscriptions you no longer use, or finding cheaper alternatives for things like cable or internet service,” Tadrus added.
These monthly charges can add up quickly. Eliminating one or two things you don’t want or no longer need can make a big difference over the next year.
Bills are inevitable, but that doesn’t mean the rate you pay is. There are many ways to negotiate bills, including your monthly utilities and insurance. Sometimes, calling and saying you can’t afford your current rate is enough to reduce your monthly bill. If that doesn’t work, many companies offer bundling, which lets you reduce how much you pay when you have multiple services with them. For instance, you might have internet and TV with the same company or two or three types of insurance with one insurer.
You can also consider reducing coverages like health insurance or car insurance. This isn’t always the best choice and may not even be an option in some cases. But generally, if you have more coverage than you realistically need, it might make sense to opt for less coverage to lower your monthly bill.
Increase Your Savings Rate
Increasing your savings rate is one of those steps that might seem small. And perhaps it is — at least at first. For instance, suppose your salary is $60,000, and your current savings rate is 5%. That means you save $3,000 per year. A reasonable goal for this coming year is to increase that rate to 6%, so you would save $3,600 instead.
An extra $600 for the year may not seem like much, especially when thinking about saving and investing for retirement. But if you can keep increasing that rate by 1% each year until you reach 10%, you will have doubled your investment compared to the 5% you are investing now. Over a decade or two, investing an extra $3,000 per year can make a big impact.
Negotiate a Raise or a Promotion
If you want to get ahead of your finances, earning more is one of the best ways to do so. While you could start a side hustle, it’s often easier to increase your earnings by negotiating a raise or a promotion where you currently work.
“For those looking to increase their income, negotiating for a raise or promotion can be a powerful way to get ahead on financial goals,” said Dmytro Kondratiev, CEO & legal board advisor at LLC.Services. “Researching market rates and preparing a strong case for why an individual is worth more can be key to a successful negotiation,” Kondratiev said.
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