With most of us expecting better financial prospects in 2023, it’s important to recognize just how brutal 2022 was for Americans and their wallets. Not only did the stock market end the year significantly lower, but cryptocurrencies also tanked heavily. Sky-high inflation also led the Federal Reserve to raise interest rates throughout the year, so borrowing money also became much more expensive.
But, the past is the past, and there’s nothing any of us can do to change it. However, we can take steps in the new year to invest more and spend less to build wealth.
With that in mind, you may be wondering what you can do to stick to your 2023 financial goals, whether you want to pay off your debt, learn to invest, or spend less on things you don’t really care about.
Here are some tips from some of the best financial professionals around today.
Make a list of measurable goals
Financial advisor David Edmisten of Next Phase Financial Planning says that reaching your financial goals becomes easier when you make each step of your strategy specific and measurable. For example, saying you want to save more money for retirement in 2023 isn’t specific enough. Instead, you should plan to increase your 401(k) contributions by a certain amount of money per pay period, then meet that goal by completing forms at work that facilitate this increase.
“Setting smaller, specific steps toward your goal that you can measure and achieve frequently will help you maintain momentum to ultimately achieve your goal,” says Edmisten.
Dream of Legacy financial advisor and CPA Anne-Lyse Wealth adds that breaking big savings goals into smaller ones can also help. If you expect to save $5,000 for your emergency fund in 2023, for example, dividing that amount by 12 months breaks it down to $417. This is a real dollar figure to aim for versus just hoping you put away enough each month to reach your goal by the end of the year.
Breaking down goals this way helps make goals more achievable, which keeps you motivated. Not only that, but people tend to lose motivation when the goal is too big.
“With this strategy, you get a sense of accomplishment along the way and a reward for good behavior that helps keep you on track,” he said.
Automate your finances
You Need a Budget (YNAB) founder and bestselling author, Jesse Mecham, says that automating your finances is one of the best ways to stick to your money resolutions in 2023 and beyond. Whether you’re trying to pay off debt, increase your retirement savings or build an emergency fund, he considers how transfers or automatic payments can help keep you on track.
Automation can help you reach your goals before the money even hits your hands by eliminating the possibility of spending that money on anything else, he says. Plus, automation can also help you stick to a budget if you have one, mainly because saving automatically and “paying yourself first” ensures that your money actually goes where you want it each month.
According to Mecham, you can also consider downloading a budgeting app like YNAB that will track your spending without having to manually tally up the numbers in a confusing spreadsheet at the end of the month.
There are also other budget apps you can consider, including Mint, EveryDollar, and Honeydue. These budgeting apps can help you keep track of where your hard-earned money is going each month, and can also help you determine how much you can automatically start saving or investing in the future.
Focus on getting out of debt
While hoping to save and invest more by 2023 is a noble goal, carrying high-interest debt could leave you in a position where you’re actively working against yourself month after month.
Florida financial adviser Chuck Czajka of Macro Money Concepts says overspending is one of the biggest pitfalls to watch out for when trying to meet your New Year’s goals. He points to a recent Bankrate survey that found more than a third of Americans have month-to-month credit card debt.
Czajka says higher inflation has probably led more Americans to lean on credit to keep up with everyday expenses and bills. However, if you can’t pay off your credit card at the end of each month, you shouldn’t use credit.
If you want to get out of debt, you can use any number of strategies to get out of debt, including a financial program like YNAB. However, financial expert Andrea Woroch recommends paying off high-interest debt with a balance transfer card.
Woroch adds that many cards in this niche offer 0% interest on balance transfers for between 12 and 21 months, though balance transfer fees do apply.
“This will give you some time to make smaller payments while also making a bigger dent in the debt than you would otherwise,” he said.
Save cash for emergencies
Financial emergencies are one of the biggest challenges preventing people from reaching their financial goals. After all, it’s a lot harder to save money and plan for the future when your world suddenly turns upside down.
Credit Sesame financial analyst Richard Barrington says saving emergency funds in 2023 may be crucial if you want to meet your goals, particularly as the Federal Reserve expects unemployment to rise this year.
Most experts agree that ideally your emergency fund should have at least three to six months of expenses that don’t earmark to pay for anything else.
“An emergency fund is a good way to have some money available to get you through a financial setback like a spell of unemployment,” Barrington said.
“Otherwise, you may have to resort to borrowing, which only makes the problem worse by adding interest charges to your expenses.”
Don’t let small mistakes ruin your plans.
Finally, senior financial planning education consultant Emily Koochel, Ph.D. from eMoney Advisor says it’s important to reflect and set money goals. However, she must also remember that humans are never perfect and that our behavior doesn’t always align with where we hope to be in the future.
“By first stating what’s important to us and paying attention to our behavior, we can begin to notice our progress toward success, identify gaps, and determine when our behavior is falling short of our ideals,” he said.
With all of this in mind, it’s also important to understand that everyone makes mistakes and “give yourself a little grace.” Ultimately, this means not giving up if you make a bad financial decision or if a financial emergency leaves you missing your goals for a while.
“If you make a ‘bad’ financial decision, take the time to readjust and get back on track,” Koochel said.
“We always have room to grow and improve.”