2023 is upon us – here are 6 steps you can take now to feel more financially prepared in the new year – CNBC

2023 is upon us - here are 6 steps you can take now to feel more financially prepared in the new year - CNBC

It’s safe to say we can all agree that 2022 has been a stressful year for people’s finances: Inflation rose sharply, with a major impact on the cost of essentials such as gas and groceries; interest rates rose with every rate hike by the Federal Reserve, making it more expensive to take on debt; and of course the stock market took many tumblesshocked many investors.

And let’s not forget the talk of a possible recession and the mass layoffs that have become more frequent since the summer.

While we have no control over these events, there are still steps you can take in 2023 to feel a little more confident and prepared with our finances.

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1. Build your emergency fund

UFB best savings

UFB Best Savings is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • minimum balance

  • Monthly costs

  • Maximum trades

  • Excessive transaction costs

  • Current account charges

  • Offer a checking account?

  • Offer ATM?

Marcus by Goldman Sachs High-yield online savings

Goldman Sachs Bank USA is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • minimum balance

    None to open; $1 to earn interest

  • Monthly costs

  • Maximum trades

    Up to 6 free withdrawals or transfers per statement cycle *The withdrawal limit of 6/withdrawal cycle will be lifted during the coronavirus outbreak under Regulation D

  • Excessive transaction costs

  • Current account charges

  • Offer a checking account?

  • Offer ATM?

2. Check your credit score

Check your credit score can be especially important if you plan to apply for a mortgage, loan, apartment, or a new credit card later in the year. Knowing your credit score ahead of time gives you plenty of time to resolve any issues that could earn you a high interest rate or make you ineligible for approval.

For example, if your credit score and it is lower than you would like, you have several months to lower yourself credit utilization ratio and keep paying on time so you can improve your score and get a better interest rate before applying for that mortgage or credit card.

Also consider using a tool like *Experian Boost®which is designed to help consumers improve their credit scores by including positive payment data for certain utilities, subscription services (e.g. Netflix) and rent on their credit reports. According to Experian, 66% of Experian Boost users saw an increase in their scores, an average of 13 points for FICO® Score 8, the most commonly used score by lenders.

Experian Boost®

On Experian’s secure site

  • Cost

  • Average credit score increase

    13 points, although results vary

  • Credit report affected

  • Credit score model used

Results will vary. See website for details.

3. Make a plan to pay for major upcoming expenses

If you have major expenses planned for next year, such as a home renovation, college tuition, or the purchase of a new car, it’s important to have a plan to pay for it. You may be planning one personal loan for your home renovation; in this case you want to make sure your credit score is in a good spot so that you can qualify for lower interest rates.

Or maybe you think it’s possible to pay next semester’s tuition if you save some money each month. By planning ahead, you can figure out exactly how much you need to set aside each month. It’s better to have a strategy rather than waiting for the last minute and making a financial decision that could potentially end up being a costly mistake.

4. Save money for student loan payments

If you’re a federal student loan borrower whose loan balance is still up in the air due to setbacks with the Biden administration’s plan to cancel up to $20,000, this is your last chance to prepare for payments. According to the Biden administration, the payment pause has been over extended one last time until June 30, 2023. If the student debt cancellation has not been implemented by then, payments will resume 60 days later, in August 2023.

In other words, you could potentially have eight months next year to plan how you’re going to make payments again if your balance isn’t wiped out by the government’s debt relief plan. Of course, many people don’t want to make any payments right now, despite the interest break, because they could save significant money if their balances are wiped out.

One of the best ways to prepare is to start saving your monthly payments. So if your monthly payments are $300, you should put that $300 into a savings account every month. This way, you’ll still have money set aside to make one big loan payment when the break is lifted. And when your debt is eventually wiped out, you’ll have a lump sum that you can use for another financial goal of yours, such as buying a home or investing for retirement.

5. Make a plan to pay off debt

While debt can certainly be a useful tool to help you pay for certain things (such as a house or college), it’s still important to manage your debt in a healthy way so that you don’t go into too much debt. Plus, lowering your debt now can help you access debt more easily if you really need it at a later date, such as in the case of a big surprise expense that your emergency fund can’t fully cover.

One way to pay off debt is by using a balance transfer card, which allows you to move debt from a credit card with a high interest rate to a new card that offers no interest during an introductory period. This should help you pay off your balance a little faster as you save on interest charges. The Wells Fargo Reflect® cardfor example, has an intro APR of 0% for up to 21 months of balance transfers and new purchases (17.24% – 29.24% variable APR thereafter; balance transfers must be completed within 120 days of account opening).

Wells Fargo Reflect® card

On the Wells Fargo secure site

  • Rewards

  • welcome bonus

  • Annual contribution

  • Introduction APR

    0% intro APR for 18 months from account opening on purchases and qualifying balance transfers. Intro APR renewal for 3 months with punctual minimum payments during the introductory period. 17.24% – 29.24% Variable APR after that

  • Regular APR

    17.24% – 29.24% variable APR on purchases and balance transfers

  • Balance transfer fee

    Introductory rate of 3% for 120 days from account opening, then up to 5% ($5 minimum)

  • Foreign transaction costs

  • Need credit

Another option for a balance transfer card is the Wells Fargo Active Cash® card as it offers a 0% introductory APR for 15 months from account opening (after 19.24%, 24.24% or 29.24% variable APR). However, this card also offers a welcome bonus: you can earn a $200 cash bonus after spending $1,000 on purchases in the first three months. Plus you earn 2% cash rewards on all purchases which makes this awesome money back card to hold for a long time.

Wells Fargo Active Cash® Card

On the Wells Fargo secure site

  • Rewards

    Unlimited 2% cash rewards on purchases

  • welcome bonus

    Earn a $200 reward bonus after spending $1,000 on purchases in the first 3 months

  • Annual contribution

  • Introduction APR

    0% intro APR for 15 months from account opening on purchases and qualifying balance transfers; balance transfers within 120 days are eligible for the introductory rate

  • Regular APR

    19.24%, 24.24% or 29.24% variable APR on purchases and balance transfers

  • Balance transfer fee

    Introductory rate of 3% for 120 days from account opening, then up to 5% ($5 minimum)

  • Foreign transaction costs

  • Need credit

Another way to pay off debt a little faster is through a debt consolidation loan. With this type of personal loan, you request an amount sufficient to cover all your debts and the lender sends the money to all your creditors – you are then solely responsible for paying back the debt consolidation loan which should have a lower interest rate than your credit card.

SoFi personal loans is a promising contender as you can apply for up to $100,000 with this lender. This makes it ideal for those who have much higher debt. Marcus by Goldman Sachs Personal Loans is another solid option as this lender will directly pay up to 10 creditors for you.

SoFi personal loans

  • Annual Percentage (APR)

    7.99% to 23.43% when you sign up for autopay

  • Purpose of the loan

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

  • Requirements

  • Need credit

  • Incorporation Fee

  • Penalty for early repayment

  • Late compensation

Marcus by Goldman Sachs Personal Loans

  • Annual Percentage (APR)

    6.99% to 24.99% APR when you sign up for autopay

  • Purpose of the loan

    Debt consolidation, home improvement, marriage, relocation and relocation or vacation

  • Loan amounts

  • Requirements

  • Need credit

  • Incorporation Fee

  • Penalty for early repayment

  • Late compensation

6. Find a financial planner you enjoy working with

A Financial planner can help you navigate life’s biggest financial challenges so you can achieve your goals. It can really help to have a different perspective from someone who is an expert in space and that’s exactly what a CFP can do.

You can use a service like Zoe Financial to search for nearby financial planners who specialize in the areas you need help with the most. Your initial consultation is usually free, so you can talk to the CFP to find out if they’re right for you and if they’re someone you’ll have a good experience with.

It boils down

Editor’s note: Opinions, analyses, assessments or recommendations expressed in this article are those of the Select editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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