6 smart money habits that will kick in in 2023
With these financial habits, 2023 could be your best year yet financially.
the main points
- It is highly recommended to invest on a regular basis to build wealth.
- Plan ahead by saving for large future expenses and working towards building an emergency fund for six months.
- Pay your credit card bill in full to avoid interest and try to simplify your finances so it doesn’t take up too much of your time.
The new year is a great time to think about what works for you financially and where you would like to improve in the future. There are a lot of new habits you can adopt that will make a huge difference in how much you save and your overall financial satisfaction. If you’re looking for ideas, here are some smart money habits to get you started in 2023.
1. Invest at least 10% of your income
The stock market did not do well in 2022. Prices fell and we entered a bear market. It sounds like bad news, but it also means This is an excellent opportunity to buy shares at a discount.
Now, to be clear, the best approach for the average investor is to invest on a regular basis. Try timing the market It rarely works well. But it’s especially important to invest while stock prices are down, when you can get more for your money.
If possible, invest at least 10% of your income. You can do this in your 401(k) at your job Individual Retirement Account (IRA), or an individual brokerage account. or all of the above.
2. Build an emergency fund for six months, minimum
that emergency fund It is one of those must-haves for adults. Everyone will face expenses they did not anticipate. By having emergency savings, you can pay those bills without feeling stressed about what you’re going to do or end up in debt.
To better protect yourself, set a goal of at least six months’ worth of living expenses in your savings account. The conventional wisdom is three to six months of expenses, but there has been talk of a possible recession, many experts Increase emergency fund recommendations. Six months is a smart goal to give yourself more buffer if you need it.
3. Pay your credit card bill in full
Don’t let their reputation fool you – credit cards It can be an amazing financial tool. Many of them earn rewards in the form of cash back or points and that may include Great sign up bonuses. There are also cards that offer free protection on your purchase, such as extended warranty coverage.
Your experience with credit cards depends on your spending and payment habits. If you spend more than you can handle and carry a credit, you will be charged Credit card interest. This is usually expensive, and makes it difficult to pay off your balance. But if you only spend what you can afford, and pay the full balance on your card each month, you won’t be charged any interest. This is how savvy consumers make credit cards work for them.
If you carry balances on any cards, find out about them How to get rid of credit card debt And start paying off what belongs to you. Once you get rid of these balances, set a goal of always paying in full moving forward.
4. Save for big expenses upfront
Most of us have probably been in this situation: You have something very expensive to buy. Maybe it’s holiday gifts, a holiday, or new shoes. But you have no idea how to pay for it. You can dip into your emergency fund, take some money out of your investments, or put it on your credit card, but none of these are a great solution.
A better approach is to think about the expenses you will incur and save up front. For example, if you know you want to take a vacation this summer, start saving now. a lot of the top savings accounts They even let you create sub-accounts, which is a great way to categorize your savings for specific goals. You can have separate sub-accounts for the Vacation Fund, Holiday Gift Fund, etc.
This method helps you get proactive about your money. Rather than waiting for these expenses to arise and seeking a solution when they do, you plan for them and make it easier on yourself.
5. Spend what really matters to you
Although it is not touched upon very often Personal finance tipsKnowing how to spend money is important. There is a lot of emphasis on using money to achieve financial security, whether it’s paying your bills or saving for the future. This makes sense, but you should also use your money to improve your quality of life in the present.
To optimize spending money, think about what kind of purchases will make you happy. The goal here is twofold.
First, is knowing what things are really worth spending your money on. You may decide that what you want is to spend your money on a new hobby, or go on a trip without committing to a strict travel budget.
By doing a little brainstorming, you can also find areas where you are spending money that is not worth it. You probably realize you’ve been paying for an expensive gym membership, but you’ll be fine at a less expensive club with fewer amenities.
6. Keep it simple
With so many financial products available, it’s easy to overcomplicate things. Some people end up messing around too much Credit card rewards Or bounce from bank account to bank account at a 0.1% difference in interest.
Aim to streamline your finances wherever possible. Find quality bank accounts credit cards and Stockbroker Love. Consider choosing a passive investment product, eg index fund. Automate your investments and savings so you don’t need to do it yourself. The more you simplify, the more time you can save yourself.
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