The start of a new year is a great time to set goals for yourself, especially as related to your personal finances. Starting off with a clean slate and creating a plan for the money milestones you hope to reach can help you hit the ground running in 2023.
According to a new survey from Bank of America, 41% of respondents achieved their 2022 resolutions and 80% have already set new 2023 goals. Some of the top resolutions for this year included increasing their savings, paying off credit card debt, building an emergency fund, and traveling or taking a vacation.
5 financial resolutions and how to get them done
Hitting your financial goals wont happen overnight, and its easy to lose track of them as the year progresses, which is why its important to set clear goals and benchmarks.
You cant prioritize goals if you dont know what your goals are yet. So, the first goal is to have goalsand to break them down into small micro goals that are easy and accomplishable, says Chelsie Moore, certified financial planner and CFA at Director of Wealth Management Solutions at Country Financial.
Heres a rundown of some common money-related resolutions and how to make a plan to achieve them in the new year.
1. Increase your savings
If your savings account balance isnt quite where you want it to be, there is an easy way to boost your savings strategy: think carefully about where youre putting your savings. Keeping it in a traditional savings account may be convenient, but it pays to stash your savings somewhere where it can continue to grow, like a high-yield savings account or a certificate of deposit, which typically have higher savings rates than traditional savings accounts.
2. Pay off credit card debt
Credit card debt can be expensive to carry month to month because interest rates on credit cards tend to be higher than interest rates on other types of debt. The average credit card balance is just over $6,000 for most Americans, and in 2022 credit card interest rates hit 19.04%, according to Bankrate.com. Thats the highest its been since Bankrate started tracking credit card rates in 1985.
If youre working on paying down debt, consider picking up a side hustle to boost your monthly income and increase your monthly credit card payments to quickly eliminate your balance. It may also be worth your while to revisit your monthly budget and look for areas where you can trim costs and allocate more toward your debt payments. Manage your debt payments by keeping track of what you owe and the associated interest rates, says Holley G. Cary, certified financial planner, vice president, and senior financial planner at First Horizon Advisors. Watch for possible opportunities to lower those rates through a payoff or refinance.
3. Build an emergency fund
Less than half of Americans have enough savings to cover a $1,000 emergency, according to a Bankrate survey. And about 35% of those surveyed said they would finance their emergency using a credit card or a personal loan, or by borrowing money from family and friends. Building an emergency fund is key to ensuring that when the unexpected happens, it wont ruin any progress youre making on your goals.
An amount equal to six to 12 months of fixed expenses is your target. Savings of between 10%12% of income should be a fixed item on your monthly budget, says Cary.
Aim to save a set percentage of your income each month and automate your savings so that you dont have to think about setting money aside each month. Crunch the numbers to figure out how much that amounts to for your unique financial situation and then break that figure down into monthly increments to begin working toward that goal and build a hefty emergency fund by the end of 2023.
4. Travel or take a vacation
In the last year, the consumer price index for airline tickets has jumped 25%the largest increase since the Fed began tracking the index in 1989. If taking a trip in 2023 is on your list of resolutions, youll need to plan ahead to fit that expense into your budget. An easy way to accomplish your resolution and save on travel is to find the right credit card for your travel needs. Travel credit cards offer a lot of perks, including cash back, points, and miles that can be redeemed for airline and hotel bookings. You may also benefit from free checked baggage, as well as free or discounted travel insurance and rental car insurance.
5. Save for retirement
Experts say that saving 5% to 10% of your gross income should be your target savings goal for retirement. This percentage doesnt include the amount youre saving in your emergency fund. If youre hoping to boost your retirement savings this year, consider boosting your contributions to max out any possible employer match. Many employers match your contributions up to a certain dollar amount or percentage of your salary, so if youre not contributing enough to your retirement account, you could be leaving free money on the table. If you anticipate a raise in the near future, or saw a bump in your pay at some point this year, consider changing your 401(k) contribution amount to account for that extra money and save more for retirement.
The takeaway
Once youve settled on the goals you hope to reach in 2023, write them down, factor them into your budget, and make sure to check in on your progress regularly to determine if there are areas you need to adjust to make them happen.
Write down your financial goals in a notebook, on the notes app in your phone, [or] email yourself, says Moore. This helps create accountability, prioritize and measure progress by giving you something to refer back to throughout the year.
