Your Financial Resolutions for 2023
2022 was a challenging year for many individuals as soaring inflation and a declining stock market hurt many Americans’ fortunes. Fortunately, a new year is quickly approaching, and plenty of individuals are thinking about their alternatives and making resolutions to get their finances in better shape in 2023.
But even when the world isn’t presenting you with additional obstacles, it may be challenging to follow New Year’s goals. To assist you on your path, we’ve put up a list of three practical ways you may begin organizing your money in 2023. We’ve also included some of our favorite financial tools.
Reduce some of your debt as soon as possible
First, keep in mind that we just mentioned a fraction of your debt—not the whole sum. Setting clear, attainable objectives is the greatest way to ensure that a New Year’s resolution sticks, according to studies. Additionally, trying to pay off all of your debt at once would be very difficult and stressful if you’ve spent years piling up debt.
However, there are several modest measures you can take to not only pay off a portion of your debt but also position yourself such that the remaining debt will be simpler to repay in the future. How? by lowering the amount of interest you now pay on your loan.
According to WalletHub, the average credit card interest rate for new accounts is 21.34%, while the rate for existing accounts is 16.27%. Even when you are making your minimum payments on schedule and paying those excessively high rates, it becomes more difficult to pay off what you owe.
How then can you reduce your interest to something more manageable? The best option, which may seem contradictory to you, is to apply for a new credit card.
Thoughts like yours are understandable, but hold on! We aren’t suggesting that you get a new credit card so that you may spend more money. Instead, you should search for a credit card with a promotional debt transfer offer.
For a limited time, balance transfer credit cards offer 0% interest on any outstanding debt that you move from other cards. Depending on the card, the introductory period might last between 12 and 21 months. You will cease paying interest on that debt for more than a year if you move it to a new card with an introductory balance transfer deal. Additionally, even if you continue making the same monthly payment that you have been making thus far, you will be paying down less debt since a part of your contribution will no longer be used to cover the expensive interest.
The good news is that credit card companies are now generally back to normal after being selective in accepting applicants for debt transfer credit cards during the epidemic, making it simpler to acquire a new card. However, if you are declined, possibly because of a poor credit score, asking for a personal loan is an additional choice.
Create an emergency fund, then gradually increase it
The need of having an emergency fund or savings account is one thing the last few years have taught us.
Some individuals recommend having three to six months’ worth of living costs in savings as a general guideline. However, do not attempt to save up to six months’ worth of expenses all at once if you currently have no savings at all. Once again, make sure your resolutions are realistic so you have a decent chance of sticking with them and putting yourself up for success in the future.
Instead, commit to starting an emergency fund in January and adding to it each month until 2023. This may be as easy as setting up a jar with a slot in the lid on your kitchen counter and depositing your loose change into it each time you arrive home. Even if it won’t amount to much, doing something is still preferable to nothing.
Opening a savings account and setting up automatic deposits of a percentage of your income into it each payday, though, is an even better method. This idea of “paying yourself first” involves setting aside money each month for yourself before you pay your expenses, as opposed to attempting to save whatever money is left over afterward.
You should set aside some time at the beginning of 2023 to sit down and create a spending plan if you are currently spending every penny of your paycheck and are unsure of how you will find money to set away for savings.
A spending plan differs significantly from a budget in that you may decide what you must purchase each month and are free to do anything you want with the remaining funds. (Plus, creating a spending plan rather than a budget is more entertaining to consider.
Raise your credit score
There is a lot of false information about how credit scores are determined and the factors that influence them, making them a frightening and perplexing subject. However, the one thing that everyone can agree on is that a higher credit score is preferable. Your credit score now determines everything in contemporary life, including the cost of your auto loan and your ability to get a mortgage to purchase a house.
So, how can you raise your grade? You cannot instantly improve your score from a low one to a great one, just as with everything else on our list. But your credit score doesn’t have to be flawless to make a difference. Even an excellent score can allow you to access new financial opportunities that an average score couldn’t, however greater is ideal.
Knowing your current credit score is, of course, the first step towards increasing it. Many of the internet tools listed in CNN Underscored’s advice on how to check your credit score are free, and some of them you could already have access to without realizing it.
How can you determine if your credit score is excellent, poor, or in the middle once you know it? The response is that it depends on the credit score you’re considering. That’s correct; to further complicate matters, several businesses use a variety of credit rating formulas. But don’t worry; we lay it all out for you in our guide to a decent credit score.
Get Credit Score Improvement
The greatest strategy to raise your credit score in 2023 is to make sure you are paying all of your bills on time each month once you are aware of your credit score and where you are. One of the key components used to determine your credit score is making payments on time. Additionally, if the debt is lowering your score, paying off some of it utilizing the advice at the start of this article will aid in improving it.
The Final Thoughts
Last but not least, Experian Boost, which is managed by one of the three major credit bureaus, is a service you may use without risk, even though you should be cautious of “poor credit repair” businesses with an unproven track record. With the help of Experian Boost, you can find strong payment records for services that don’t typically show up on your credit report, such as utilities or streaming service bills like Prime, and add them to your credit file to raise your credit score. The greatest part is that it’s free.