A new year is a chance for a fresh look at your finances — and the time to start is now, when you’re likely to feel heightened motivation.
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When you consider that the steps you are taking now can lead you to success this year and beyond, what do you have to lose?
If you don’t already have an emergency fund or retirement plan in place, it’s probably a good idea to get those things in place first. Then take a look at these eight key steps you should take to achieve financial success in 2023.
Gain clarity about your financial situation
“Sit down and answer the four financial clarity questions: What do I own? What do I earn? what do i owe And what do I need?” said Holly Ruxin, CEO and founder of Montcalm. “Most people don’t know all the answers right away and need to do some thinking and research.
“Set a sensible goal of working on it a little each month. You’ll be amazed at how much confidence this clarity gives you, and you’ll enjoy the practice more and more. It’s not about finding the ‘right answer’, it’s about using simple questions to learn more about yourself over time and make financial decisions from a place of clarity.”
Create a plan that aligns with your priorities
“It’s important to align your spending with your priorities,” says Crystal Williams, financial coach and owner of Smart Money Financial Coaching. “One mistake I usually see is creating a spending plan that is too restrictive. I believe it’s important to create a plan for your money that allows you to live a life you enjoy AND achieve your financial goals. So if a client wants to go on vacation, pay for private school for their kids, or change jobs, we work together to create a bang for their buck that includes those things.”
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Use your bonus to pay off debts
If you’ve accumulated holiday shopping or have debts that have been going on for a while, use at least some of the extra money you recently received to pay off those debts.
Andrew Lokenauth, a personal finance expert and money educator, recommends using the debt snowball method, or the debt avalanche method. The snowball method involves paying off the smallest debt first and then working your way up to the largest. The avalanche approach is to pay extra money on the debt with the highest interest.
“In terms of paying off debt, I used the debt snowball method at first, but then switched to the debt avalanche method,” Lokenauth said. “The Debt Snowball Method is the better way to stay motivated, empowered and less overwhelmed, and that’s how I had to feel when initially dealing with debt.
“After becoming more financially savvy, I switched to the debt avalanche method, which is a better way to save money in the long run. … This method results in you paying less interest over the life of the loan as you focus on paying down the debt that carries a higher interest rate.”
Check your 401(k) contribution rate
When contributing to a 401(k) plan, it’s important to maximize your contributions so you can increase your returns.
“Adjust your 401(k) contribution rate to take advantage of the increased limit of [$22,500 in 2023]said Jason Dall’Acqua, CFP and President of Crest Wealth Advisors in Annapolis, Maryland.
If you are unable to adjust your 401(k) contributions to meet the cap, at least meet the contribution minimums to receive the full amount of Matching Funds your employer can offer you.
Adjust your investment portfolio as needed
“Most stock market indexes posted double-digit percentage gains in 2021, which is good for your wealth but could result in you taking more risk than originally intended and your allocation not aligned with your intended goals,” Dall’Acqua said. “Remember that past performance is not indicative of future returns.”
Reconsider your tax deduction
“Review your tax return once it’s completed and decide if you should make an adjustment to your paycheck tax deduction,” Dall’Acqua said. “While a refund may feel good, it means you’ve withheld too much tax, reducing your monthly cash flow.”
Cancel unnecessary subscriptions
Stop wasting money once and for all.
“Check your bank statements for recurring payments and see if you’re still using the service and rate the value for money,” said Nick Bormann of Bormann Wealth Management. “Subscriptions are designed to take a backseat and potentially be inexpensive. but all together they eat up the monthly cash flow.”
Check insurance coverage
“Call your insurance agent and check your insurance coverage,” Bormann recommended. “Your agent may be able to suggest ways to save you money — for example, by purchasing policies with higher deductibles or by bundling policies together.”
Bormann also said that if you have complex insurance needs, you should review insurance coverage annually to make sure your risks are covered.
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This article originally appeared on GOBankingRates.com: 8 Money Moves to Be Financially Successful All of 2023 Now