12 ways to transform your financial approach in 2023
You are enthusiastic about organizing your finances and achieving your financial goals. This may include paying off debt, saving for a significant purchase, or ensuring your retirement investments are secure. Alternatively, you may simply be frustrated by the impact of inflation on your finances. Regardless, it is time for a change. Here are 12 ways to transform your financial approach in 2023.
1. Establish a budget plan
A budget plan is a foundation for financial control. Despite the misconception that budgeting restricts freedom, it actually empowers you. When you create a budget, you direct your money, instead of wondering where it went. If you have not done this in the past, start now. Budgeting is the first step to being intentional with your money.
2. Factor in inflation
Budgeting can make you feel like you received a raise. By including inflation in your budget, you can stay ahead of rising costs. When you plan where your money goes, it is easier to identify areas to reduce or trim back. If you need a side hustle to help balance the costs, budgeting ensures that the extra income goes where you need it. Don’t let inflation get you down; adjust your budget accordingly and you will conquer rising costs.
3. Don’t Count on Student Loan Forgiveness
It’s time to stop relying on the notion of student loan forgiveness, as it has proven to be a fleeting hope. The payment pause has been inconsistent and despite four years of discussions, there is yet to be any concrete progress on loan forgiveness. Carrying student loans can hold you back from making real progress in life. It is important to remember that you agreed to repay the loan and it is time to take responsibility and pay off your student loans.
4. Tackle Your Debts Head-On
While paying off student loans, don’t forget to address your other debts as well. Debt can hold you back from realizing your full potential and limit your opportunities, both in the present and future. If you’re unsure where to start, try the debt snowball method. Start by paying off the smallest debt first and work your way up to the largest. By doing so, you’ll build momentum and motivation with each debt you pay off. It may seem strange at first, but the freedom that comes from being debt-free is unparalleled. It’s an unusual feeling, but it’s worth it.
5. Caution Regarding Buy Now, Pay Later Schemes
One must be vigilant of the numerous Buy Now, Pay Later (BNPL) scams that have surfaced in recent times. Companies like Klarna, Afterpay, and Affirm are taking advantage of this trend to lure individuals into buying things they can’t afford with seemingly easy payments. However, this is nothing but a trap that keeps you in debt. A study by Ramsey Solutions revealed that 60% of BNPL users struggle with managing their payments, and two-thirds of them are still paying for an item they bought through a BNPL service even after they no longer own it. To avoid these scams, it’s best to stay away from them.
6. Monitoring Online Spending Habits
Another crucial aspect of managing your finances is keeping a check on your online spending habits. The majority of impulse shopping happens online, on our smartphones, with the ease of quick purchases. To prevent overspending, consider these steps: delete shopping apps from your phone, think overnight before making a purchase, clear cookies on your browser, or check in with a budgeting accountability partner. While online shopping has its advantages, it’s important to keep it in check and avoid overspending.
7. Fully Fund Your Emergency Fund
The significance of having an emergency fund cannot be emphasized enough. It is a vital aspect of the 7 Baby Steps, which is a tried and tested method for saving money, settling debt, and growing wealth. If you are burdened with debt, it’s advisable to start with a $1,000 emergency fund, and as you advance, you should aim to accumulate a fully stocked emergency fund that can cover three to six months of your expenses. With this backup in place, you can have peace of mind knowing that you’re ready to face any unforeseen circumstances. If you had to draw from your emergency fund last year, make sure to replenish it.
Related: 10 ways to save money in 2023
8. Maintain Investment Continuity
After establishing a fully funded emergency fund, the next step is saving for retirement. It is important to not discontinue investment just because the market is facing a downturn. Investing for retirement is a long-term strategy that should be approached with patience and persistence. It’s like a roller coaster ride, where getting off in the middle of the journey can result in harm.
9. Don’t Miss Out on Home-Buying Opportunities
Before deciding to buy a house, it’s important to assess whether you are truly prepared. Don’t delay your purchase just because you hope for a dip in rates or prices. Instead, consider these key points: having no outstanding debt and a well-stocked emergency fund, having a sufficient down payment, meeting the eligibility criteria for a conventional loan with a fixed rate of 15 years, keeping housing expenses within 25% or lower of your monthly earnings, factoring in the cost of closing and relocation, and having a long-term commitment to residing in the home for at least a few years.
10. Joint Checking Account for Married Couples
Getting married signifies that two individuals are becoming one, including their finances. Adopting a united approach towards finances, instead of dividing income, bills, and payments can avoid financial disagreements in the marriage. By working as a team, financial success can be achieved more quickly.