A new year offers the opportunity to start fresh and do things differently, and if your financial health isn’t where you want it to be, now is your chance to start over. As we step into 2023, reflect on your finances for the previous year to determine what changes you must make for personal success in the new year.
Many individuals and households are struggling to keep their finances in order due to the soaring prices of essential items due to the 40-year high inflation rate. The key to sorting out your finances during these challenging times is being conscious of your spending and saving habits. Consider the following tips to manage your finances and enter 2023 confidentially.
Pay Off Existing Debt
Debt can significantly influence your finances and hold you back from achieving financial freedom. The most common forms of debt include a mortgage, bank loan, or student loan. If you have enough money saved up, consider paying off a portion of your debt to reduce your burden throughout the rest of the year. This will offer you peace of mind and positively influence your credit score. Improving your credit score will improve your creditworthiness and allow lenders to trust you with their money, making you eligible for lower interest rates on loans and mortgages.
When paying off loans other than your mortgage, consider the debt avalanche or debt snowball method. The debt avalanche method requires you to pay extra money toward the debt with the highest interest rate. With the debt snowball method, you must pay off the smallest debt first and work your way up, regardless of the interest rate.
Update Your Current Budget
Nothing is stagnant in life, and that includes your budget. Things change with time, so it’s important to revise and update your budget accordingly. This is especially crucial in today’s challenging economy, as the inflation rate has spiked the prices of basic commodities.
Start evaluating your current budget by assessing your monthly income. Are you saving enough money at the end of each month? Do you expect to get a raise at work this year? Once you’ve determined if there will be any changes to your income, start evaluating your spending. Consider any expenses that may change this year and update your budget accordingly.
Establish an Emergency Fund
Ideally, you should set aside three to six months’ expenses for emergencies, separate from your retirement savings. This fund should be kept specifically for emergencies, such as job loss, vehicle or home repairs, and medical bills.
If you don’t have enough funds to cover emergency expenses, consider taking a payday loan. Reputable platforms like GoDay lend responsibly and offer access to fast cash to help get you back on track – not further off it. Their transparent fees allow you to make informed decisions when borrowing money and reduce the risk of dealing with unexpected expenses.
Set Up a Filing System
Whether you prefer to store your receipts and bill payments physically or digitally, it’s important to set up a filing system to stay organized. Take your time to identify your expenses, income, and savings to create an effective system that effectively tracks your financial health.
If you’re storing paper copies of your documents, store them safely in a cabinet. Digital records should also be secured with multi-factor authentication on your computer or phone. The last thing you want is for your confidential data to fall into the wrong hands, which can lead to identity theft and other criminal activity.
Getting your finances in order during these challenging times can be overwhelming, but the right approach can streamline the process. Use this guide to gain control of your financial health this year!
