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Every January, roughly a quarter of those who take on a New Year’s Resolution choose something financially focused. Whether that’s saving more, spending less, or investing somewhere new.
While we always encourage healthy financial planning habits, each year is different. So, for those who are serious about financial planning for the new year, here are five things to consider based on expectations for 2023.
There’s a good chance you’ve been doing this already with inflation a major financial concern for Americans in 2022, especially this Fall. According to the wealth management company Northern Trust, the September consumer price index (CPI) – which indicates changes in the price of consumer goods – rose 8.2% from the previous year.
Instead of struggling through inflation this year, plan ahead to make it a little less painful. Adjust your financial plan to account for higher costs on major costs like shelter, airfare, food, and auto repair.
The good news is, costs are expected to lower. Inflation is around 8.0% now, and according to Kiplinger, it’s expected to further drop to as low as 3.5% by the end of 2023.
It’s strongly believed that we will see a recession in 2023. But, it’s most likely to be what’s being described by many experts as a “brief and shallow” recession.
That’s exactly what it sounds like; a recession that occurs in certain parts of the world and does not last more than about a year.
To best prepare yourself, be sure to develop a budget with wiggle room built in – which should already be the case to account for inflation – and have an emergency fund.
If possible, keep up with your current payments as well as any debt repayments. And since recessions typically cause unemployment, take stock of your career and consider what you might do if you get laid off.
When choosing what debts to pay off, always start with high-interest debt, such as credit cards. According to a 2022 GOBankingRates survey, more than 31% of American adults have more than $1,000 in credit card debt.
Why high-interest debt first? You get the most financial reward! That's because the higher the interest rate, the more money you're charged in borrowing fees.
Start by making sure you understand all the terms and conditions of your current loans. That’s also a good practice for any new debts you decide to take on. Always learn the terms on any credit cards or bank accounts you open, as well as loans or cash advances you take on.
For anyone 49-years-old or younger, the max you could contribute to your 401(k) savings in 2022 was 8.2% of your earnings. For 2023, that number is increasing to 9%.
For those 50 or older, increase your annual withholding to take full advantage of the new $30,000 limit.
We’ve talked a lot about what to pay off and why to save, but there’s one thing we would suggest everyone spend a little on this year; self-care.
Looking after your physical and mental health is important, so try and set some time and money aside at the beginning of the year to fund it.
Try to plan at least one long break (a week or two) and a few shorter ones (two to three days) to step away and recharge your battery.
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