Preparing for a new year can be an exciting time of goal-setting and planning. With bumpy economic times in the rearview and some uncertainty on the road ahead, it may be a good time to make money resolutions that put into action some financial lessons from the past couple years. Or maybe you'll think of 2023 as an opportunity to make a completely fresh start.
Either way, while no one can predict the future, making a plan for your money in 2023 can help you build stability and, even through complex economic times, feel excited about what's to come. Here are five money resolutions to consider as the new year approaches.
1. Gauge Your Financial Resilience
Heading into 2023, some may feel anxiety related to inflation, interest rate hikes, job security and economic uncertainty. If you're currently feeling economic pressure, or even if you see sunny days ahead, you should make a financial plan for the year ahead. Start by setting gritty, resilience-boosting goals for the new year:
- Build professional agility. Whether or not you're worried about losing your job, take steps now to boost your agility. Start by updating your resume to show your most recent experience and skills. Then look at ways to boost your appeal as a candidate, such as pursuing an in-demand online certification.
- Diversify your streams of income. In today's gig economy, there's a side hustle for everyone. Ask yourself what gigs you could turn to for cash if you need extra income. For example, could you drive for a rideshare app? Freelance online? Make money tutoring, caring for children or animals, completing tasks or selling things you don't need? The best side hustle is often one that allows you to bring in cash, build new skills and one that you enjoy too.
- Boost your emergency fund. When it comes to building financial stability, there isn't any replacement for a flush emergency fund. Ideally, you want enough cash to cover your basic needs for three to six months in the event of a loss of income. But start where you're at, set a small goal and learn how to build your fund now.
- Seek financial advice. If you're unsure of how the current economy is impacting your retirement savings or other investments, or if you're unsure of how to plan financially for the year ahead (and beyond), consider reaching out to a reputable financial advisor to help you chart your course. Ultimately, your goal isn't just to make it through market downturns in one piece—it's to thrive financially long-term.
2. Revamp Your Budget
Inflation soared to a high of 9.1 in the middle of last year, then eased to a rate of 7.1 in November 2022. That placed a burden on the average household, as consumers were left paying more for the same goods and services, including essentials such as groceries and transportation.
Whether you're feeling pressure from increased prices, or if you simply want to build stability and save more in the new year, take time in 2023 to reset your budget so you can stay on track to meet your goals.
Start by listing all your current monthly expenses, both fixed and variable. Then take a look at after-tax income you receive, including government benefits. A useful budgeting method to use if you're new to—or getting back into—budgeting is the 50/30/20 plan. You'll allocate half your after-tax income to necessities such as housing and groceries, a maximum of 30% to nonessential expenses like takeout and entertainment and at least 20% to debt payoff and savings.
This 50/30/20 breakdown may be hard to achieve at first, but noticing how close you can get is useful information. The practice will help you identify where your money is going, any expenses you can cut back on and how you might be able to increase your savings rate.
3. Make a Long-Term Plan for Student Loan Repayment
If you're a federal student loan borrower, you're likely waiting for news on the status of Biden's student loan forgiveness plan. With the future of forgiveness still uncertain, be sure to stay up to date on the latest on the U.S. Department of Education's Federal Student Aid website. But in the meantime, it's a good idea to prepare for the possibility of payments resuming in 2023.
Federal student loan borrowers have not had to make payments since March 2020, and their interest rates have been set at 0%. As it stands now, the pause on payments will officially end in summer 2023, or after the legal status of the forgiveness plan is resolved.
It's been possible to put money toward your loans anyway, and make a bigger impact on the principal balance since interest isn't accruing. But if you've taken advantage of the pause and haven't paid loan bills in almost two years, take steps to ensure you're ready for payments to resume.
First, contact your student loan servicer to find out the amount of your next payment. Then look at that budget you've created and identify whether you can afford the bill on your current income. If not, ask your servicer to change repayment plans. As a federal loan borrower, you have access to generous repayment programs like income-driven repayment, which lowers bills to a portion of your income and may even provide forgiveness after 20 to 25 years of payments.
4. Give Your Insurance Coverage a Checkup
It's a great idea to take a look at your insurance policies each year. That way, you can make sure you're still getting the best rates and have the right type of coverage for you. Look into these types of insurance in 2023:
- Life insurance: If you have dependents or substantial assets in your name, life insurance is essential. The amount of coverage you need depends on your income, assets, debts and your family's specific circumstances.
- Car insurance: If you've put off buying auto insurance, don't delay in getting a policy. Even if you already have one, comparing insurance quotes once or twice a year is a smart way to ensure you have the cheapest policy you qualify for. You can also try Experian's tool for comparing auto insurance to ensure you're getting the best rate. And, lastly, don't forget to look for other ways to reduce your car insurance costs.
- Homeowners insurance: The same goes for homeowners insurance. Whether you bought a new home in 2022, you refinanced or you've had the same policy for a while, compare options across several insurers to find the best price and coverage out there.
- Travel insurance: If you're planning to travel in 2023, consider taking out a robust travel insurance policy. That way, you're protected from all sorts of vacation mishaps—such as lost baggage, rental damage and even illness.
When buying new insurance, it's often smart to first consider a policy through a company where you're already a customer in case any discounts are available. Then compare your quote with multiple other insurers to ensure you're not missing out on a better deal.
5. Find Ways to Boost Retirement Savings
If you lost your job, took a break from the workforce or withdrew from your retirement account in the past few years, your savings may have suffered. In 2023, commit to bolstering your retirement plan so you're not at risk of having to make up for a shortfall.
Fast ways to ramp up retirement savings include depositing one-time windfalls—like a tax refund, tax credit or signing bonus at a new job—directly into your 401(k) or individual retirement account (IRA). If you're not already taking advantage of an employer match on your workplace retirement plan, save at least as much to capture that match. And if you're looking for a new job, prioritize offers from employers that offer strong retirement savings options, including matching dollars.
You can still set aside money for retirement as a self-employed individual or when you're between jobs and aren't sure when you'll be employed full-time again. Options include a solo 401(k) or a traditional or Roth IRA. Take a look back at your budget to double-check how much you can afford to save for retirement, but the gold standard is setting aside 15% of your pretax income each month. It may not be feasible to save that much right away, but make 2023 the year that you get as close as possible.