There are about a million reasons to want your money to go further in 2023. Perhaps 2022’s high inflation has left you feeling like you’re paying more for less, or maybe you’ve taken a pay cut that has put you under financial stress .
Maybe you get a year-end bonus and want to make sure it isn’t wasted on “stuff” that won’t really help you build wealth. And let’s not forget that the performance of the stock market this year is sending everyone’s net worth down like a rock.
Whatever your reason, it’s always smart to look ahead to a new year with the goal of doing better if possible. But what are the best ways to push your money further when it feels like everything in the store costs more every time? I reached out to several financial advisors and experts to get new insights, and here’s what they said.
Ditch high-interest credit card debt
Rising interest rates benefited savers throughout 2022, but they had the opposite effect on households with long-term credit card debt. In fact, the average credit card interest rate is according to Bank rate.
If you have this type of debt, paying it off can help you save money on interest and free up cash flow for other expenses you may have. While you can pay off debt the old fashioned way, savings expert Andrea Woroch says you can save on interest and pay off debt faster with a balance transfer credit card.
“Now’s a good time to transfer your balance to a card with a 0% balance to avoid paying interest for up to 21 months based on the card’s promotional offer,” she says.
If you go this route, remember that you will incur an upfront balance transfer fee that is usually equal to 3% or 5% of the transferred debt amount.
Maybe you made a nice income in 2022, but ended the year without really knowing where your money went. In that case, financial planner Tania C. Foster from PlanTrust Asset Management says it might be time to track your spending and use a monthly budget that determines where your money goes each month.
Not only is budgeting the most effective way to understand how to stretch your money further, but Foster says it allows you to understand what’s coming in and what’s going out. This helps you find areas where you can cut costs immediately.
If you don’t know where to start, know that there are many different budgeting tactics available. While you can always try a simple pen and paper budget, you can also look into free budgeting software such as Mint or paid budgeting software like YNAB. com (You need a budget).
Automate your savings
If you struggled to save and invest as much as you wanted in 2022, the new year is a good time to change that for good. Financial advisor Mike Hunsberger of Next Mission Financial Planning says that “paying yourself first” is often the best solution to this problem.
Ultimately, this means putting money into savings or investment accounts first, rather than waiting until the end of the month and seeing what you have left.
“As time goes by, you don’t even miss this money because it’s not money you think you can spend,” he says.
You’ll definitely want to automate the process by setting up regular transfers to your savings and investment accounts on the days of the month that make the most sense.
“Making saving and investing automatic and not something you have to decide on every month will go a long way toward building lasting wealth.”
Invest in yourself
Most of us hear a lot about investing in the stock market, but what about investing in yourself? Financial advisor Dan Cronin of Lifestyle Wealth Management says it might be wise to consider some forms of self-improvement in 2023, as investing in your education and improving your skills can pay off big time.
By investing in yourself and training, you acquire new skills, he says. You can then increase your earning potential and improve your financial situation.
What steps do you need to take to invest in yourself in 2023? According to Cronin, this could include taking online courses or classes or earning additional certifications within and outside your field. You can also focus on learning new skills that are in high demand.
Take steps to improve your credit rating
If you’ve had a few credit mishaps in recent years and your credit score isn’t as good as it should be, the New Year is a great time to turn things around. After all, good credit can mean you pay lower interest rates and fewer fees when you borrow money, and it can also help you qualify for lower auto insurance premiums.
Accredited Financial Advisor Lauren Bringle of Yourself financially says you can focus on credit by using credit building tools such as a credit building loan. Another option is a secured credit card that allows you to build credit through responsible use.
Bringle says you can also build credit with bills you already pay, such as your rent payment and streaming services. For example, Experian Boost is a free service that allows you to get credit for most of the bills you pay on your Experian credit report.
Increase contributions to retirement accounts
Financial planner David Edmisten van Financial planning in the next phase says his top tip for maximizing income in 2023 involves taking advantage of increases in income limits and premium amounts for tax-advantaged retirement accounts such as 401(k) plans and traditional and Roth IRAs.
The advisor points out that contribution limits for 401(k) and similar workplace retirement savings plans will increase to $22,500 in 2023 from $20,500 in 2022. Meanwhile, IRA contribution limits will increase to $6,500 in 2023, which is up from $6,000 in 2023. 2022.
Edmisten adds that income varies to earn eligible contributions to IRA accounts also increase for 2023.
“So not only are the amounts you can contribute higher in 2023, but you can also earn a larger income and still potentially be eligible to contribute,” he said.
Edmisten also points out that employees age 50 and older should also be aware of the additional catch-up contributions available to them.
Find ways to lower your bills
Finally, financial planner Kayla Johnson from Wealth Management Corbett Road says the new year is the perfect time to cut back on how much you pay on some of your bills. You may even be able to reduce some bills completely, including monthly subscriptions you paid for but no longer use.
There are also some bills that you don’t normally think about that you can purchase and potentially lower. For example, Johnson points out that people think about their cell phone plans and plans, but property and casualty insurance are often overlooked.
In other words, you should look for bills to reduce, but also try to lower premiums and monthly charges for regular expenses that you intend to keep.