Improving Your Financial Health in 2023
At the beginning of 2022, I wrote the blog below to provide some simple guidance to start your financial year off in the right direction. Since much of the same information applies, we are sharing it again with some updates for the new year and a bonus extra tip.
Many people start every New Year by making resolutions that are quickly forgotten whether they are related to personal, business, or financial goals. These resolutions can seem daunting and something easier to put off. Below are some achievable tips for financial organization and management that will hopefully turn into good habits to carry forward in the new year and beyond.
7 Tips for Financial Fitness
There are several things you can do to get ‘financially fit’. Some are easy and require virtually no work, and some may take a little more time. The list below is a guide to help you get started.
- Create a budget – It is never too late (or early) to create a budget. A clear budget with detailed categories can help you set guidelines for what you can afford to spend and help identify areas where you could cut back, as well as assure you are saving for retirement. Make sure to (1) set clear goals (2) determine the best budget method and style that will assure you stick to it (3) track your progress.
- Review existing budget – Assuming you had a budget in place in 2022, review it and make modifications based on layering in last year’s actual income and expenses as well as adjustments to financial goals. Evaluate those variances with consideration given to the inflationary environment which certainly impacted the last half of 2022. This analysis helps gain a full understanding of where you are financially and planning more effectively for 2023. You may also find a need to change the budget style to one that is more beneficial and motivating for you.
- Have a savings plan – With savings account interest rates at historic highs that are expected to continue rising in 2023 it is a great time to start pumping up your savings. Having both a primary and secondary plan is ideal. A primary plan is for emergencies, i.e., job loss, car wreck, or medical issues. That should cover 3-6 months of expenses, so it does not disrupt your budget. The secondary plan is discretionary savings, say you want to plan a big trip or buy a home. Typically, these are events that are 3-5 years down the road. Ideally, you set up a savings account and arrange for a direct deposit out of each paycheck, so it is done, and you do not have to think about it. If you received a salary increase or year-end bonus, it is also smart to increase your savings rate.
- Use financial management software – This will make tips #1, #2, and #3 easier. All the data from your financial accounts can be uploaded including historical data, and custom categories and reporting can be created. This will absolutely help with a financial organization, provide more visibility into spending, and help you make smarter savings and spending decisions, all with the ultimate objective of attaining your financial goals.
- Review/Consider Investments – The upside to a falling stock market like the one we have been experiencing is more affordable investing. If you can commit for the long-term (10-15+ years), make it a priority in the new year. Again, this is a long-term play-buying and selling and get-rich-quick schemes do not work, and you might be penalized with capital gains taxes. If you have an existing portfolio of investments, it is an excellent time to review that allocation. Given that 2022 was a volatile year in both the traditional stock and bond markets you should revisit your asset allocation and make sure that mix is aligned with your goals.
- Establish a debt payment plan – This can be part of tip #3 or completely separate. The most common source of debt is credit cards. Given the upward direction that interest rates continue to go in it is a tough time to keep balances on credit cards or any type of line of credit. A goal should be to pay your full credit card balance on time each month once you clear up any outstanding debt. This will also help improve your credit score.
- Revisit Retirement Account Strategy – If your company has a 401K make sure you set automatic contributions from each paycheck and increase that amount if you receive a raise assuming you are not already contributing the maximum. In 2023, the maximum amount you can contribute to your 401k will increase from $20,500 to $22,500. The contribution limit for Individual Retirement Accounts (IRAs) is increasing too, up to $6,500 annually. Take advantage by increasing how much you set aside.
Putting the Time in Now Will Pay Dividends Later
Most people strive for financial health and success. Positioning your finances in an organized way for the new year can help to achieve that goal. The tips listed above take some work to accomplish, but a little work now can lead to major benefits later. Wouldn’t it be great if your credit card were paid off, if you reduced a monthly expense while auditing your budget, or if you could build your investment portfolio to provide for your retirement? You can achieve these goals, but it requires some effort.
You Don’t Have to Do It Alone-Getting Help
Working to establish financial organization and management for 2023 is a great step toward financial security and success. Completing the suggestions above can make a significant difference for the better in this coming new year and beyond. Often it is better to have another set of eyes and hands to help with this. The Client Advocates at My Personal Bookkeeper can guide you in your journey, hold you accountable to your goals, and will be your partner in achieving financial success. Visit us at https://www.mypersonalbookkeeper.com/contact-us/, or call us at (847) 972-6822 to learn more about ways we can help.
About the Author: Lisa Lipton
Lisa grew up in Northbrook, IL, and has lived in the Chicago area for most of her life, other than a few years spent in Baltimore, MD early in her career. Today she calls Deerfield, IL home. With an undergraduate degree in Advertising and a graduate degree in Integrated Marketing Communications, Lisa has 20+ years of experience working mainly in direct-to-consumer marketing with a focus on direct marketing for a variety of companies.
Having managed her mom’s care for several years as she struggled with failing health, Lisa understands and appreciates firsthand the need for the services and resources My Personal Bookkeeper provides. Also, being a busy professional herself, she recognizes that someone such as herself may need extra assistance organizing and managing their daily affairs. Lisa is very excited to combine her professional experience along with her personal empathy to spread the word about MPB and provide support for those who need a helping hand!
In her spare time, she enjoys spending time with family & friends, traveling, exercise, all kinds of music and loves to watch and play tennis.