10 Ways To Improve Your Finances In The New Year
The ball has dropped and Auld Lang Syne has been sung, which can only mean one thing: It’s the new year!
January 4, 2016 was when I decided to get my own financial shit together. It’s the day that everything changed for me and why I have a soft spot in my heart for New Year’s resolutions. New Years was the start of my debt free journey, which led to paying off $71,000— and it can be the start of improving your finances too!
If you’re looking to set money goals in 2023 or improve your personal finances, I have just the thing for you. Here are 10 ways to improve your finances in the new year.
Set SMART Money Goals
When you want to improve your finances in the new year, the first thing you should do is look over last year. What worked for you? What didn’t work for you? How do you want to move forward in your financial journey?
The next step is to create SMART money goals with the data you gathered and the ways you want to improve. SMART goals stand for:
Specific
Measurable
Attainable
Relevant
Time-based
The object of SMART goals is to parse out, in detail, how you’re going to make your money goals happen.
Let’s say you went over 2022 and discovered that you didn’t put any money away in your savings account. Now, in 2023, you want to beef that rainy day fund up.
Instead of saying, “I want to save money this year,” try “My partner and I will save $10,000 by October. We will do this by saving $1,000 per month.”
Specific - You and your partner
Measurable - You’re going to save $10k
Attainable - $1k per month x 10 = $10k
Relevant - Having an emergency fund is a personal finance foundation
Time-based - By October
Take each of your goals and make sure that you have them written, in detail, using the SMART goal method. This will give you a good idea of timelines, what is actually possible and how you are going to make your goals a reality instead of just a wish.
Create A Budget
There are multiple ways to budget. There’s the No-Budget Budget, the Zero-Based Budget, the 50/30/20 Budget, the Cash Envelope System, the list goes on and on.
The important thing when you’re creating a budget is to not overthink it. Just start and try your best— especially when you’re new to this.
Here’s how to start a budget:
Pull up your checking account statements for the last three months
For each month write down all of your transactions and categorize each transaction
Average out the categories
For example:
October Restaurant Spending: $250
November Restaurant Spending: $400
December Restaurant Spending: $700
Average Restaurant Spending Budget Is: $1,350/3 = $450
This is your baseline budget
Add your debts and bills
Adjust the catagories
If you want to cut your restaurant spending in January, try a budget of $400.
It really doesn’t need to be more complicated than that in the beginning.
I create and track my spending using Mint.com. Since I have been using Mint for over 5 years now, I can go back and see all of my progress. You can use YNAB, or any budgeting app/template. You can also create your own using Excel or Google Sheets. The sky is the limit.
One final thing about budgeting: Make it realistic.
If you’re spending $800 per month on restaurants, I don’t recommend setting a $400 budget for restaurants. That is unrealistic. I guarantee you’ll go over-budget and then you’ll likely give up on budgeting altogether. Which is not what we want!
Try lowering things gradually and see how it goes. Budgets are living documents, meaning, they are meant to be adjusted frequently and work for what is best in your life. Remember: Budgets are meant to work with you, not against you.
Track Your Spending
Tracking your spending and budgeting go hand in hand. You can’t know if your budget is realistic, or even working, if you don’t check in with your spending!
This is why tracking your spending is one of the most impactful ways to improve your finances.
By tracking your spending you can see if you’re living above your means, if what you’re spending on is in line with the way you want to live your life and if you need to adjust your budget in the future.
It’s also a great way to see if you can negotiate any bills or if you’re paying for something you completely forgot about.
Set a timer for 5 minutes per day at the same time each day to go over your spending. Catalog each transaction and check in with your budget. Again, this is why I love the Mint app. It’s super easy to do each day.
No matter what the method, dedicate time to your bank accounts and budget. That way, you know exactly what is going on and nothing gets missed.
Negotiate Bills
Since you are budgeting and tracking your spending, you now know where your money is going! Congratulations!
Now it’s time to trim the fat. I challenge you to negotiate at least one bill per month or see if you can get something for a more affordable price.
Paying $150 for your phone bill? Why not hit up customer service and see if your customer loyalty can be used as leverage to lower your monthly price tag.
Haven’t shopped around for car insurance in a hot second? It’s time to Google or use a service like Gabi.
Wondering if you can get internet for a lower price? Call your provider!
These are all simple ways to lower your cost of living that I highly recommend. It will take some time, patience and persuasion, but the worst they can say is no.
Make Automation A Priority
I remember as a little girl, my dad and I would go around town once a month and pay all the bills. It was boring and took forever and I always thought it was a waste of time. Of course, it wasn’t a waste a time, but it has gotten way easier to accomplish this adult responsibility. Thank God technology has evolved and we can now automate those expenses.
Not only that — but we can automate saving and investing too! This means, no matter what, you are always paying yourself first!
Take time in January to automate everything you possibly can in your financial life if you haven’t already. There’s no need to go around town or even call providers anymore.
Have all reoccurring bills auto-draft out of your checking account
Mortgage/Rent
Utilities
Debt payments
Subscription services
Memberships
Set up reoccurring savings transactions from your checking account to your savings account
Automatically send money to your investment accounts
This will not only make your life way easier, it will make sure that you are taking care of your financial priorities first and foremost.
Open An Ally High Yield Savings Account
I will sing the praises of Ally all day long and you can’t stop me!
I love Ally and have been with them for years. They have an incredible bucket system with their savings accounts and offer a competitive APY.
Their customer service has always been impeccable, they are FDIC insured and they offer all the bells and whistles you could ever want.
While a high yield savings account won’t beat inflation, 3.50% APY is better than the national average APY, which sits around 0.06%.
Always keep your emergency fund close to you, meaning, don’t put it somewhere that takes you multiple days to access. This is why I bank with Ally.
I have a checking and savings account with Ally, where I can easily transfer my rainy day fund in a flash and use it in case of, well, an emergency. I really like that I can disperse my savings account money in different categories for my various sinking funds and they have savings boosters available if you want them.
10/10 recommend.
Begin Your Holiday 2023 Sinking Fund
The most wonderful time of the year may have passed, but it’s going to be here again before you know it.
More than half of shoppers go in to debt buying Christmas presents. Most of them don’t pay off Christmas debt until next year. That means not only are they charging presents on their cards or BNPL services, but they are being charged insane interest rates on top of that!
That’s gonna be a hell no for me!
I begin my Christmas sinking fund in January and I suggest you do the same to avoid that debt trap.
If you spend an average of $1,900 on Christmas, divide that number by 11. Save $172 per month so that you’ll have a big chunk of change in a savings account ready to go for the holiday season.
I’d also like to take this time to suggest you go over all of your yearly expenses in January and create sinking funds for each of them. These expenses can include property taxes, car maintenance, registrations, pet check-ups, planned vacations, etc.
If you have any big purchases you’re wanting to make within the year, have a sinking fund dedicated to those purchases as well.
That does’t mean you have to contribute to every single sinking fund right away, but knowing that you have these expenses queued up will make you more aware of the financial road ahead of you.
Preparing for expenses using sinking funds is a strategy to make spending and saving money more digestible and attainable, instead of either not saving and going into debt or using an entire paycheck for one thing and being up shit creek after the purchase.
Improve Your Credit Score
A sure way to improve your financial life is by increasing your credit score! Credit scores are used by lenders to see what type of borrower you are and if they deem you responsible with debt.
That means you can get lower interest rates on car loans and mortgages as well as have fees waived and be approved for an apartment based off of your credit score. So, credit scores matter and can affect your money in a big way.
That’s why it’s important to know what affects your score and how to use credit cards responsibly.
Credit scores are calculated by the following:
35% Payment History
30% Credit Utilization
15% Length Of Credit History
10% Types Of Credit
10% Recent Activity
Here are a few ways you can increase your credit score:
Always pay your bills on time. This is the factor that effects your score the most, so make sure you’re doing this. And if possible, pay off your credit card each and every month to avoid interest
Use 3-10% of your total available credit. Some experts say you can use up to 30%, but I like to er on the side of caution when it comes to credit utilization
Don’t close accounts. The longer you have open accounts, the better
Avoid having multiple credit inquiries at once. Only open accounts if you absolutely need them
Ultimately, once you know the “game” of credit, you can increase your score. Check out Credit Karma to see where your credit score is at.
Create An Additional Stream Of Income
Increasing your income can go a long way towards reaching your financial goals. You can use this “extra” money towards paying off debt, saving or investing. You can also rely on this income stream when your primary income stream is threatened (ex. COVID).
The way that I increase my income each year is by dog sitting on Rover. In 2022, I made over $16,000 dog sitting. I also work with companies that sponsor my social media platform, speak to various groups of people about finance and make and sell soap on Etsy.
In 2023, I plan to do all of this again and I want to create more passive streams of income.
There are literally hundreds of ways to increase your income and create passive income streams. I suggest checking out my other Rover blog articles if you’re interested in that, or check out my friend Merilee’s side hustle blogs and side hustle ebook.
You may try something and you hate it. You may try something and it becomes your full time job later. You never really know. The important thing when making this a goal is to not stress yourself out, capitalize on what you already know how to do and love and make it attainable.
Open An Investment Account
The last, but certainly not least, tip for improving your finances in the new year is to open an investment account.
If you’re already investing in a 401k via your employer, pat yourself on the back and make 100% sure you’re taking full advantage of the company match.
If you are not contributing up to the company match, you are leaving part of your compensation package on the table and losing out on money and time in the market.
After that, there are individual accounts that are not tied to employment that you can open such as an individual brokerage account, HSA, Roth IRA, Traditional Roth, etc.
Last year I opened a Roth IRA with Charles Schwab. I recommend Schwab, Vanguard, or Fidelity.
This video on a Roth IRA by my friend Sami Womack is a great resource if you’re looking for more info.
There are many ways to learn about investing. I suggest picking up The Simple Path To Wealth by J.L. Collings, I Will Teach You To Be Rich by Ramit Sethi, and looking up investing-based influencers, personal finance podcasts, educational YouTube videos and blog articles.
If investing seems like it’s out of your reach, I want to assure you that you can invest right where you’re at— and you absolutely should.
You can purchase fractional shares for as little as $5. The important thing is that you continually invest and that you learn a little bit at a time. Before you know it, you’ll be a pro.
I hope that this article helps you improve your finances in the new year! Remember, it’s important to make attainable goals and be realistic with what you can do.
Give yourself grace when you mess up (because you will, that’s life) and continue to take small steps forward.
You’ll reach your money goals before you know it!