2023 has finally arrived, and for the first time in post-pandemic times, things are looking pretty upbeat. (Is the pandemic really over? President Biden seems to think so, but I digress.)
Economic adviser to the president Brian Deese said the US economy, which has been lagging in the past, has shown a remarkable uptrend due to strength and resilience in the labor market having a better position than other developed countries in the world.
And people are finally feeling optimistic about what lies ahead, so this is a perfect time to get your finances in order and set up your financial success in the coming months.
This is the time to set goals for the future, so here are ten tips to get your finances in order and begin the New Year with a fresh perspective:
10 Tips to Get your Finances in Order
- Do a yearly financial assessment – By doing this at the start of the year will make sure that you can adjust your budget to account for any changes in expenses and income. Some people have a tendency to underestimate their expenses, so you have to make sure that you can align your budget to account for any alterations.
The best way to undertake this is to make an Excel spreadsheet to keep track of your spending. Another is to review your credit card and bank statements from the past year to get an approximation of your monthly spending.
- Start saving money each month – This is one of the best ways to build your financial stability. You don’t need much to get started, since even a small amount will add up over time.
Instead of a dollar amount each month, reserve a percentage of each paycheck. It will make sure that you are always saving even if your income goes up or down, and the months you will earn less will balance out those when you earn more. For this to work, you have to be consistent in saving and start as early as possible.
- Revisit your household budget – Doing this is particularly valuable right now since high inflation will force you to allocate more essentials like gasoline and grocery supplies.
For the New Year, you have to assess your average monthly income, your variable and fixed expenses, and establish your financial priorities to develop the right budget for you.
- Check and double-check your emergency fund – Make sure to set aside something for a rainy day, and it is always a good idea to double-check it often to see if it is still sufficient.
An emergency fund can help you avoid liquidating your portfolio assets at depressed prices during times of market volatility. It can also keep your finances afloat in unanticipated circumstances, like a sudden change in the employment of a loved one. A rule of thumb is to save three to six months’ worth of monetary expenses in a liquid and safe account.
- Make sure to take care of your debts – Even though you don’t have debts or are already proficient in managing them, do consider taking measures in reducing and consolidating them further. For instance, if you are expecting some extra money coming in from a raise or a year-end bonus, make sure to apply it to any balances with high-interest rates.
- If you want to resign from your job, be sure you are prepared – If you want to quit, make sure you have a way to create a new source of funds as quickly as possible. If the reason for your resignation is you want to go into business on your own, make a point that you have vetted your business plan to ensure its viability. It is also important to ensure that your finances are in order before you quit. It will usually take longer to replace your income than expected, so make sure you have at least six months’ worth of savings.
- Prioritize your financial and personal health – While the Covid-19 pandemic might not be a menace to society as it was before, a survey from Morgan Stanley 2022 Investor Pulse Poll reported that 37% of the respondents said their emotional health had suffered.
The New Year can be a chance to continue prioritizing your financial and personal health. Most companies provide digital learning tools and financial-educational programs that can supplement the advice you’ve got from your financial advisor. Utilizing these tools can assist you in creating a sharper version of yourself in the workplace and also help you make better use of various workplace benefits, like equity compensation, a retirement plan, or insurance.
- Think about investing in ways that matter to you – The same survey from Morgan Stanley also reported 71% of the respondents say it is important that their portfolio line up with the beliefs, values, and issues, which matter to them. However, only 44% believe it is happening, and 66% express a desire for companies they invest in to have policies in place to promote inclusion, diversity, and equity.
For this year, consider including more impact to your investments while also potentially garnering positive financial returns, so think about aligning your investments to whatever values you may have like climate change, alleviating poverty, etc.
- Be sure you are on track with your goals – Make sure you are still on the right path towards achieving your goals, like investing and saving for retirement. If you are still on track, then talk to your financial advisor about new goals you want to achieve.
- Create a personal budget – For some people, a budget might be constricting, but keeping track of your spending can be helpful in understanding where your money goes each month. A clear-cut budget can assist in setting guidelines for what you can afford to spend and help to identify areas where you can cut down.
You can begin by writing down all your fixed expenses, like groceries, mortgage/rent, savings, etc. Then you will be able to see how much money you have remaining from flexible costs like clothing, entertainment, eating out at restaurants, etc. Your credit card statement can be an easy way to see what you’re buying in one place. Most cards can let you view your total annual spending by category, which is quite useful in setting up a budget for the incoming year.
Each year has its own set of challenges, and 2023 might look hopeful, you still won’t know what the future holds. And to provide you with sound financial advice, Jojo Alamillo is the financial adviser you will need.
Go to his site tanconnects.com/jojo, or email him email@example.com, or find him at his Facebook page Ascend99 Inc.