As we enter the new year, it's time to look at how we can improve our financial health. Whether you're starting fresh or looking for ways to improve your finances, now is an excellent opportunity to take control of your money and create good habits that will lead to long-term financial success. To ring in the New Year, we are sharing these easy tips and tricks to help you kick off 2023 with better financial health.
Access your financial situation and set (realistic) goals.
When beginning the journey toward better financial health, it is crucial to assess your current situation and set realistic goals. This can involve reviewing your income, expenses, debts, and savings. Having a clear picture of where you stand financially will help you develop achievable goals for the year ahead.
Consider short-term goals, such as reducing excessive spending or paying down debt, and long-term objectives, like building up an emergency fund or investing in retirement accounts.
Once you have identified your goals, create step-by-step plans on how you can reach them throughout the year. With some planning, discipline, and dedication, achieving these targets can lead to better financial health in 2023.
Create a budget and track your spending.
Creating a budget is a critical step when it comes to improving your finances. It will help you track where your money is going and ensure that your spending aligns with your goals.
Start by tracking your income sources on one side and then list all your expenses on the other. This includes anything from rent and bills to groceries and entertainment. Once you understand what you're spending each month, adjust accordingly if certain items are over budget or if there's room to cut costs.
It is important to remember to also factor in things like irregular expenses such as car repairs or trips so that you aren't caught off guard. If budgeting is new to you, you have the ability to set up savings goals and track your spending with the help of TTCU's Financial Wellness tool in the mobile app and in online banking.
You can also use the Federal Trade Commission's free budget worksheet to help you get started. With a well-crafted budget in place, you'll be more likely to stay on track and reach your financial goals this year.
Pay down debt and build up savings.
Paying down debt and building up savings are two of the most critical steps to improving your financial health. Reducing existing debt can free up cash flow, while increasing savings can give you a buffer in case of emergencies or other unexpected expenses.
To pay down debt, focus on targeting the accounts with the highest interest rates first. For example, credit card debt typically has higher rates than student loans, so it's a good idea to prioritize paying that off sooner rather than later.
As for saving, try setting aside small amounts every month until you reach a comfortable cushion amount. Automating transfers from your paycheck into savings can also make this easier, as you will remember to set money aside each month.
Build and improve your credit score.
Improving your credit score can also play a significant role in reaching financial health. This three-digit number is used to gauge how well you manage debt, and it's vital for things like getting approved for loans or mortgages.
The best way to improve your credit is by making all payments on time, which will help demonstrate that you are responsible for borrowing money. It would be best if you also aimed to keep your utilization low—ideally under 30%—which means spending less than one-third of your available credit each month. For more ways to improve your credit score, visit our blog post, "5 ways to improve your credit score."
It may take some time before you begin to see an increase in your score, but the effort you put in now can go a long way toward building better credit.
The start of a new year is the perfect time to take control of your finances and set yourself up for success. With discipline and consistency, these steps will help you reach financial stability this year and beyond.