Soon, the new year will be upon you. Along with 2023 may come lofty promises of becoming a completely different person once and for all. While self-improvement is all well and good, grandiose New Year’s promises often have little weight behind them.
Instead of pinning all of life’s meaning on outdated resolutions, focus on making long-term, measured improvements. Small, manageable habit changes are a few ways to make lasting changes. And when it comes to improving your financial standing, you’re navigating actions and emotions. As 2023 approaches, prepare yourself with a few tips to help you work toward a bright financial future.
This suggestion may have you feeling tricked into creating a restrictive budget. But tracking your spending isn’t the same as tabulating every expenditure. Monitoring your income and spending is base-level financial stewardship. Just as you’d confirm safe delivery of your direct deposit, so should you ensure that your expenses line up.
Practice exporting your debit card transactions to a spreadsheet on your paydays. Generally, most people log into their bank account at this time anyway, so it’s barely an extra step in your schedule. Review the expenses cleared by your account and confirm they’re as expected. If there’s any discrepancy, contact the retailer, and if you have trouble, contact your bank.
While a strict budget isn’t required, understanding the general percentages of your income that you allocate toward certain categories matters; the 50/30/20 budgeting principle can guide you in this area. You can flexibly all over incopaymentassigning 50% of expenses to essentials, 30% to fun, and 20% to financial goals.
Establishing these three buckets can help you keep up with your obligations while still enjoying your hard-earned money. If you love trying new restaurants, feel free to make dining out a hefty portion of your 30%. But if you love home improvement projects, devote it to trips to your favorite hardware store. Categorizing and tracking expenses can help you stick to your goals and ease financial stress.
The Jetsons may have made you think you’d have your own Rosie. While that promise has yet to be realized, you can use automation to improve your financial standing. A familiar and widely available account feature, automation allows you to set and forget transactions like bill payments and savings transfers. Review your monthly obligations and habits to determine if and when automations make sense.
First, set up automatic payments for the minimum balance owed for essentials like credit cards, car payments, and housing. Missing these payments can quickly impair your finances and put vital needs like shelter and transportation at risk. Some loan service providers also offer rate discounts for setting up automatic payments. This could be especially helpful because it can reduce the total cost of your loan throughout its lifetime.
Those with shared account access can set alerts for transactions over a certain amount, improving mutual accountability to their shared budget. Those with shared account access can set alerts for transactions over a certain amount, improving mutual accountability to their shared budget. Those with shared account access can set alerts for transactions over a certain amount, improving mutual accountability to their shared budget. You can also use automation to alert you to deposits, transactions over a certain dollar amount, and even category-based spending. This can help you manage your monthly cash flow and budget categories and tip you off to anything concerning.
One far-reaching benefit of better managing your finances is improving your credit score. Lurking under the surface of your daily financial life is a number that’s constantly changing based on your behavior. However, most people only consider their score when considering a major financial move. Unfortunately, the worst time to start caring about your credit score is when you anticipate applying for a loan.
Most financial institutions report their customers’ economic behavior to the credit reporting bureaus monthly. At any moment, your payment history, balances owed, credit age, credit mix, and new credit can shift your score. As you strive toward better financial habits in 2023, consider how to improve your credit score simultaneously.
The biggest impact on your score is your on-time payment history. If you’ve struggled to pay your bills on time, this is the first factor you should attack. If you’ve worked to pay your bills on time, this is the first factor you should strike. If you’ve struggled to pay your bills on time, this is the first factor you should attack. Late payments cost you more than your pride; they typically come with extra fees and get reported to the credit bureaus after 30 days. With a history of late or missed payments, future lenders will quickly lose confidence in your ability to repay them. The automated transactions discussed above are a great way to do that.
Your credit utilization — the revolving credit you use out of your available total — influences 30% of your score. Typically, a history of maxing out your credit limit signals an inability to manage cash flow. While responsible variable credit use can improve your score, pushing the boundaries of your credit limits is harmful. Work to pay down balances owed and maintain a total utilization of 30% or less. Over time, responsible credit use can boost your score and improve future loan approval odds and rates.
Knowing what type of future you want and getting there are two different things. But just because the mountain ahead seems daunting doesn’t mean the climb isn’t possible. To keep yourself both motivated and seeing progress, it’s important to identify realistic goals.
Targeting your high-interest credit cards for annihilation is commendable and even recommended by most financial professionals. But if your owed balances exceed your income, you’ll likely lose motivational steam before spring. Instead, focus on setting achievable goals and identifying the steps to make them a reality. Think like 2024, you, and make moves each day toward a brighter financial future.