Want to Improve Your Finances in 2023? Start With These 3 Goals

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Make this the year you finally stick to your New Year’s resolution. 

Being better with money is a popular New Year’s resolution, but it’s also kind of vague. If you want to increase your odds of success, it helps to get a bit more specific about what you hope to accomplish this year.

You may already have some ideas about what those goals should be, but here are a few others that are worth considering. Tackling even one of these tasks in 2023 can go a long way toward improving your finances.

1. Create an emergency fund

Building an emergency fund should be everyone’s top financial priority because without one, you could wind up in serious financial trouble when an unexpected bill arrives. Ideally, you want to have at least three months of living expenses on hand, but some people prefer to save six or even 12 months of expenses.

You should keep this money in a high-yield savings account where it’s easily accessible. You don’t want to invest these funds because you never know when you’ll need to withdraw them. If the stock market is down at the time, you may have to sell your investments at a loss and you could still come up short. You won’t have this risk with a savings account.

Remember, these funds are intended for emergencies, not planned expenses. If you know you have an upcoming expense, you should save for this separately. And when you do tap your emergency fund, try to replenish it as soon as possible. Don’t forget to review your fund annually to see if you need to increase or decrease it to keep up with inflation and lifestyle changes.

2. Pay down high-interest debt

High-interest debt, like payday loan or credit card debt, can quickly spiral out of control. What might start as a few hundred dollars can balloon into several thousand dollars over the course of a few months. You’ll have to budget more and more of your monthly income to debt repayment to keep up, and you could rack up additional charges for late fees.

It’s a vicious cycle, but there are ways to put an end to it. Some people prefer to just cut back on other expenses and put their extra cash toward their debt repayment. One popular way of doing this with credit cards is known as the debt avalanche method. This is where you make the minimum monthly payment on all your cards, then put your remaining cash toward the card with the highest annual percentage rate (APR). When that’s paid off, you move onto the card with the next-highest APR, and so on.

Other people do better at debt repayment if they use a balance transfer card. These are credit cards that offer a 0% introductory APR for anywhere from a few months to a few years. Since your balance won’t accrue interest at first, any money you pay will go toward reducing your debt. However, there are usually one-time fees associated with balance transfers.

Personal loans are another option for those with credit card debt, and they also work for those with payday loans or other types of debt. These are installment loans, so you’ll have a predictable monthly payment. You don’t need to put down any collateral, but because of this, interest rates on personal loans tend to be higher than rates on other types of loans, like auto loans.

3. Create a plan for your long-term goals

Think about what you hope to accomplish financially over the next few years. You might want to purchase a new vehicle, fund a wedding or vacation, or buy a bigger home. Make a list of each goal and decide which is your most important. If any of these goals have specific deadlines, note these as well.

Then, determine how much you’ll need to save and decide how you’ll make that happen. It might be as simple as setting aside a certain dollar amount out of each paycheck or it might be more complicated, requiring you to bring in extra money via overtime or a side hustle. Explore a few options until you find what works for you.

If you don’t have anything specific you’re trying to save for, you can always set aside money for retirement. This is best kept in a retirement account rather than a savings account. Retirement accounts give you special tax breaks and enable you to invest your money so it can grow more quickly.

The tasks on this list may not all apply to you, but if there’s any you haven’t done yet, now is a great time to get started. Even if you don’t fully accomplish what you set out to do by the end of 2023, you can probably still make some good progress toward your long-term goals.

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