Essential Personal Finance Changes To Make in 2023

Improving your financial self may seem difficult, with inflation continuing to rise. However, making small changes can help you recover quicker from fluctuating economies. Here are a few financial changes to consider making before the end of 2023.

Improve Your Credit Score

Your credit score is a powerful tool that can earn you lower interest rates. Lower interest rates mean that you pay less to borrow money. Better credit scores can also help you qualify for lower insurance rates. A few ways to boost your credit score now include paying down debt, avoiding a high balance, and carefully choosing the lines of credit you open to avoid too many inquiries.

Consider Refinancing

Interest rates are higher than they have been in years, but it’s still worth comparing your interest rate with the current rates. Refinancing a home or auto loan into a lower interest rate could save you thousands of dollars. While requesting a refinancing loan will lead to an inquiry on your credit card, you can price shop rates among multiple lenders without it further affecting your credit score as long as you do so within 14 days.

Set up an Emergency Fund

An emergency fund may be even more important to have in today’s economy. Funding an emergency account ensures that you can cover unexpected costs, like a flat tire or a missed paycheck. Financial experts recommend at least three to six months of your living expenses in an emergency fund to give you a security cushion.

Identifying additional emergency strategies may also be important before you need them. How will you and your family manage a financial emergency? Can you cover your bills if one of your household members loses their job?

Take Advantage of Cash Advances

If you need money fast, a cash advance may be the answer. However, not all bank cash advance options are the same. Paying too high of an interest rate on a cash advance can make it difficult to repay the loan. Make sure you understand how much you’re paying for a cash advance and whether or not it will affect your credit score before signing the paperwork.

Pay Down Credit Card Debt

Interest rates are too high to have credit card debt right now. Tackling your credit cards with higher interest rates is a great start. Once you pay off these credit cards, you can move onto medium-level interest rates and then eventually pay off all your credit cards. If you can avoid using your credit cards, you’ll free up all the money you spend on credit card bills to cover other expenses or build a savings account.

Make sure you understand the pros and cons of owning a credit card before opening a new one. While owning a credit card can provide you with rewards and discounts, it can also come at a high cost if you don’t pay down your balance each month.

Fund Your Retirement Accounts

One of the biggest financial mistakes that people make during times of inflation is cutting back on retirement funding. Reviewing your retirement accounts may be less than enjoyable during difficult economic times. However, continuing to contribute to these accounts can help you offset the losses. 

Any money you contribute during lower economic times means you’ll earn more when the economy recovers. The extra revenue you earn now will offset any losses you incurred by buying when prices were higher. Additionally, you can continue benefiting from compounding interest. If you have an employer-sponsored 401(k) with contributions, it’s especially important to continue funding the account. When an employer matches 401(k) contributions, it’s essentially free money. Failing to fund your account during down economic times can lead to you losing out on a lot of free money.

Identify Ways To Cut Costs

Now is also a good time to identify ways to cut costs. Finding ways to reduce your utility or mortgage payments can give you more wiggle room for other household costs or to fund an emergency savings account. Price shopping car or home insurance each policy renewal can save you a few hundred dollars. Cutting cable and switching to TV streaming can also add up in savings.

Understand Your Money Habits

Understanding your money habits is even more important in 2023. It’s important to understand how inflation is affecting your household. Also, knowing where your money is going gives you an opportunity to set realistic goals and make any necessary changes. Calculating your expenses versus your income can also help you identify a need for change.

When interest rates increase, and the cost of goods gets more expensive, creating a financial strategy is more important than ever. By understanding your expenses and spending habits, you can allocate money to paying down debt and improving your financial position despite a fluctuating economy.

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