January 24, 2023
The beginning of 2023 is a great time to reassess your finances as well as your overall monetary goals. The following seven resolutions will help you build a stronger financial portfolio, eliminate daily worry over your money, and give you the power to make your long and short-term goals a reality.
Create an Emergency Fund
No matter where you are on your financial journey, creating an emergency fund is vital to decreasing your daily stress and allowing you to pay for the unexpected. Although your emergency fund could be as low as $500 depending on your hourly wage or annual salary, a $1,000 to $2,000 fund is far superior these days, especially as prices for many goods and services continue to rise.
Your emergency fund should be placed in an easily accessible savings account and should only be used for necessary yet unexpected expenses, such as medical bills and automobile repairs.
Pay Down High-Interest Debt
Once your emergency fund is in place, your next goal should be to eliminate debt. By coming up with a plan to pay down debt at the beginning of the new year, you will find it easier to motivate yourself to avoid unnecessary purchases and stick to your debt payoff plan.
Although some financial experts recommend paying off your smallest debts first to give your spirits a quick boost, you will actually save more money by focusing on paying off debt with the highest interest rate. Check each of your recent credit card statements for the most current annual percentage rate to determine where to begin.
Build a Better Credit Score
Your credit score affects more than simply your ability to open new credit card accounts. You will also rely on your credit score to secure a future auto loan, home mortgage or personal loan. In fact, some employers and landlords will even run a credit check to determine how trustworthy you are in paying your bills. While there are a variety of behaviors that affect this score, one of the top ways to boost this number is to pay your bills on time.
Even if you are focused on paying off a single credit card as quickly as possible, be sure to continue making the minimum payments on the rest of your accounts. Other ways to boost your credit score include paying down debt, refraining from opening any new accounts and keeping your oldest accounts open even if you no longer use those accounts.
Stick to a Budget
Budgets can seem scary to some people because they clearly show exactly where your money is going. It can be surprising to see the categories where you are most likely to overspend whether it is eating out, buying clothes or traveling. However, once a reasonable budget that matches your income and needs is in place, you will actually feel more confident in spending your money because you will know exactly how much you can spend and where every dollar of your paycheck is going.
Choose the Right Rewards Credit Card
Using a credit card can actually be beneficial if you choose a rewards credit card and commit to paying off your balance every month. With so many types of rewards-based credit cards offered today, it’s important to find the one that best suits your lifestyle. For example, if you travel frequently for work, a travel rewards card that accrues free miles will serve you best. Others find that points-based reward cards are best because they can turn in the points they accrue for gifts or gift cards that they wouldn’t be able to afford.
However, cash-back credit cards are among the most popular these days because they offer superb value. With these cards, you can typically transfer your rewards directly to your checking account or can use your accrued money to pay down your credit card balance.
After high-interest debt is paid off, you should make retirement savings one of your top goals for the year. Once your only remaining debts, such as your home mortgage, have interest rates that are lower than typical market returns, you should invest between 10% and 15% of your annual income in a retirement account. Of course, if your employer matches your retirement savings in a 401k, always invest there first.
Create a Fun Fund
Many financial goals may seem exciting initially as you imagine a debt-free future and golden retirement years. However, when you become lost in the daily grind of work and other responsibilities, it can be difficult to stick to your resolutions. This is just one reason why you should include a fun fund in your budget. This type of savings can build towards anything, whether it’s a nice vacation, a new TV, or a pool for the backyard.
Only have a small amount of money that you can afford to put aside for the fun fund? No worries. Even the simplest pleasures each month — like a dinner with friends — can go far in fueling your desire to continue paying down debt, saving money and following your budget.
Master Your Money with La Capitol
As you work through these seven financial resolutions this year, you will find that you gradually grow in confidence about where your money is going and how that reflects on the security of your future. To learn more about money management, check out La Capitol’s online financial education center where you will find plenty of advice from our trusted experts.