As 2022 draws to a close and we turn our thoughts to the year ahead, it’s a good time to consider what New Year’s resolutions you might want to make. For some people, these might include exercising more or eating healthier. Many people see the start of a new year as the ideal time to gain better control of their finances.
If 2023 is the year you plan to build your financial wellness, read on. In this article, we’ll share our top 8 financial wellness tips for 2023.
Read: Do you have a budget for 2023? Explore some of the most popular and effective budgeting strategies.
The concept of “financial wellness” is multi-dimensional but essentially refers to your relationship with money. It covers how well you’re prepared to deal with emergencies and to what extent you have plans in place to reach your long- and short-term financial goals.
Financial wellness also relates to your attitudes and behaviors towards money. For example, do you live within your means? Do you have a budget and a savings plan, and how well do you stick to them?
Many have argued that money isn’t essential and can’t buy happiness. While that’s true, money impacts many things. It’s what pays for food, shelter, and healthcare. It pays for the necessities you need to survive and the luxuries you enjoy.
Having too little money can lead to worries that impact your health, happiness, and livelihood. Financial stress can lead to mood changes and lower productivity, impacting your relationships and work performance.
If you’ve set out to improve your financial wellness in the coming year, some key tips can help set you on the right path.
We’ve compiled our top 8 financial health tips to help you on your way to financial freedom in 2023:
Budgeting isn’t anybody’s favorite topic, but it’s an essential building block for financial freedom – and it actually isn’t all that difficult once you get started.
One easy-to-follow budgeting model is the 50/30/20 rule:
Try to get into a habit of spending money this way, and before you know it, you’ll have developed a rhythm. If you make a mistake one month, don’t see your efforts as a failure and be tempted to give up. Financial freedom isn’t a sprint; it’s a marathon!
Ideally, your savings should be deposited into a separate account rather than into your regular checking account. Many banks and other financial institutions offer savings accounts with very low or no fees and favorable interest rates.
When money is tight, saving is often the first thing people let go of. However, avoid dipping into your savings to cover bills or day-to-day expenses, and do what you can to continue to add to your savings. Even putting away $5 a month is better than nothing.
Making sure you have a plan for when life throws unexpected events your way (such as medical bills, vehicle repair bills, or the loss of a job) is an essential tenet of building financial wellness. You never know when an emergency will appear, but you can prepare for them by putting extra money aside in an emergency fund.
Most experts recommend saving about three to six months of expenses in your emergency fund. Always set up a separate savings account to store this money, or it will be too easy to spend.
Payday loans are small-dollar cash advances against future earnings from your paycheck. Lenders take a signed check from the borrower, which the lender cashes on the day of the next paycheck. Alternatively, the lender can take the checking account information from the borrower for a direct withdrawal from the account on payday.
But there’s a problem. Too often, when payday comes, people can’t fully repay their loan due to other bills they need to pay, so they end up rolling over their debt. Now, the loan has a new repayment day, but the interest and fees stack up from the previous month, increasing the debt month to month. Payday lenders are renowned for charging exorbitantly high interest rates. These debt traps often become long-term problems that can be difficult to recover from.
In December 1969, a few U.S. grocery stores started accepting credit cards. A reporter for the Journal Herald of Dayton, Ohio, interviewed shoppers at a store to see how they felt about it. “Never!” one woman told her. “That would be like paying for a dead horse – paying for something already used up.”
We’re not suggesting you get rid of all your credit cards in 2023, but this anecdote should make you pause to think about your attitude toward them. Credit cards offer a convenient way to pay for goods you need on the spot, especially if you’re low on cash. However, it’s all too easy to reach for them to pay for things you don’t really need, like expensive dinners out or the latest shiny gadget.
Keeping an eye on your credit score – especially before making any major spending decisions – is an important tip for financial wellness. The higher your credit score, the lower the perceived risk of defaulting on a loan, so you’re more likely to negotiate favorable interest rates when buying a car or taking out a mortgage. In addition, regularly checking your credit report will also ensure that you can act quickly in the event of illegal activity on your credit card or any other kind of identity theft.
Every outstanding debt you have drags down your credit score. So, make a point of paying off as much and as many as you can. Go after your accounts that charge the highest rates of interest first.
On-demand payment is exactly what it sounds like: a means for employees to access wages they’ve accrued but not yet received instead of having to wait for their next weekly or monthly payday. It’s also known as Earned Wage Access (EWA), and it’s becoming an increasingly common element of employee benefit packages. Accessing pay you’ve already earned but not yet collected avoids you maxing out your credit cards or turning to expensive payday loans if you find yourself short on cash.
The more you know about something, the more likely you are to make more thoughtful, informed decisions. Continually educating yourself about money matters is a great way to get a handle on your finances and incrementally build financial wellness.
Here are a few ways to increase your financial literacy:
Payactiv goes beyond simply offering on-demand pay. Our all-in-one Livelihood Platform takes a holistic approach to prioritizing employee financial wellness. This includes services that help address immediate financial needs and enable people to take steps toward long-term financial health, stability, and growth.
We trust that the tips we’ve shared empower you to make small tweaks to how you approach your finances in 2023. Remember, you don’t need to be perfect, and you don’t need to immediately correct every poor financial habit you have. But we do encourage you to devote more attention to how you think and feel about money in the year ahead.
Stay focused on your goals and reach out for help to set yourself up for greater financial wellness in 2023 and beyond.
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