If you want more time, freedom, and flexibility in your future, now is the time to focus on your finances. Whether you are just starting out or trying to correct past financial mistakes, now is the time to get your finances in order and work towards building the life you deserve.
Here are 7 things you can do before 2023 to improve your financial security and increase your chances of success:
1. Set Financial Goals
Setting financial goals is important because it helps you plan and prioritize your financial decisions. Financial goals give you something to work towards and can help you stay motivated to make smart financial choices. They can also help you track your progress and measure your success.
Some examples of financial goals might include saving for a down payment on a house, paying off credit card debt, building an emergency fund, saving for retirement, or paying for your child’s education.
Having specific financial goals can help you create a plan to achieve them, such as by creating a budget, cutting costs, increasing your income, or investing your savings. By setting and working towards financial goals, you can increase your likelihood of financial success and your overall financial well-being in 2023.
2. Calculate your Net Worth
Knowing your net worth is important because it gives you a snapshot of your financial situation and helps you understand your overall financial health. Your net worth is the total value of your assets (such as your savings, investments, and property) minus your liabilities (such as debt).
By knowing your net worth, you can understand your starting point and set realistic financial goals based on your current financial situation. You can also make informed financial decisions and plan for the future, such as by saving for retirement or building an emergency fund.
One easy way to calculate your net worth is to attach all your financial accounts to an aggregator like Personal Capital. This tool saves me hours each month and it’s free!
3. Review your Budget/Intentional Spending Plan
The start of a new year is a great time to review and assess your budget and financial plans. It can be helpful to look for areas where you can cut back on expenses or reduce costs that have increased over the past few years.
By updating your budget, you can identify things you can do before 2023 to stretch your money further and achieve your financial goals. You might start by adjusting expenses like phone and internet bills, groceries, or housing costs if they have increased. By taking these small steps, you may be able to create more room in your budget for long-term savings goals, such as vacations or retirement.
4. Check Your Emergency Fund (And Consider Moving it to an HYSA!)
It’s important to have an emergency fund in case something unexpected happens, such as a job loss or unexpected medical bills. You’ll want to save at least 3-6 months’ worth of living expenses in a liquid, easily accessible account.
Right now HYSA (high yield savings account) rates are higher than ever! Many of these accounts are just as liquid as a regular savings account, have no minimums, and are FDIC insured. Find a good one with a great rate and low/no fees and get going.
5. Make a Plan to Pay Off High-Interest Debt
If you still have credit card debt or other high-interest debt, focus on paying it off as soon as possible.
You can’t make progress on your net worth through investing until you’ve paid off your high interest debt.
6. Save on Taxes By Using the Right Retirement Accounts
Retirement accounts are a great way to save for the future and lower your taxes. If your situation has changed this year, you might be ready to contribute to a new type of account. Figuring out the right accounts for you will be
Contributions to a 401(k) or traditional IRA are tax-deductible, which means that you can reduce your taxable income by the amount you contribute. This can lower your tax bill in the current year.
Contributions to a Roth IRA or Roth 401(k) are not tax-deductible, but the money you contribute grows tax-free and can be withdrawn tax-free in retirement.
If you are enrolled in a high-deductible health plan, you may be eligible to contribute to a Health Savings Account (HSA). Contributions to an HSA are tax-deductible, and the money can be used to pay for qualifying medical expenses tax-free.
7. Review and Understand Your Investment Portfolio
I’m a firm believer that you should never invest in something you don’t understand. If you have investments in a 401(k) or investments managed by you, a partner, or a financial advisor, you should learn what they are and make a plan to review them periodically to make sure that they are aligned with your financial goals and risk tolerance.
If you have no idea where to start, the best place is to learn the basics of the stock market by reading a book, attending a workshop, or taking a course. To get you started, sign-up for my next free beginner investing workshop on January 19th, 2023, right here.