How To Prioritize Your Financial Well-Being In 2023

How To Prioritize Your Financial Well-Being In 2023

If money and the lack thereof has been keeping you up at night this year, you’re not the only one as the cost of living has seen many consumers make massive adjustments to their spending habits as prices keep climbing. From groceries to services and non-essential items, everything is now more expensive nowadays, and it’s become increasingly hard for many to stay on track with their spending habits.

Stubbornly high inflation has left many consumers looking for ways to prioritize their spending this year, despite prices at the wholesale level easing for a fourth consecutive month in October in the United States.

Though inflation has seen easing from its painfully high peak in June 2022, which saw consumer prices rise by an eye-watering 9.1%, aggressive interest rate hikes have boosted the cost of borrowing, leading to bigger macroeconomic repercussions.

Signs of the economy slowing have led experts to predict a looming recession in the coming year, another economic headwind to many consumers who may already be living paycheck to paycheck.

The business of dealing with your money has become an anxiety-induced experience for many, and against a backdrop of a potential recession, many of us are taking extra steps to financially secure ourselves for the upcoming year.

In an ever-challenging economy, financial well-being and understanding the basics of working with your money have become almost second nature, yet there are still many of us that are not quite sure how to properly budget, spend and save even as the cost of living crisis rages on.

Get a grip on budgeting

For too long you have lived in a state of denial, ignoring the importance of setting up and following through with your budget. On top of this, there are still too many of us that don’t know the importance of setting up a budget that works for our financial position.

The best place to start is by adding up your monthly income, against your monthly expenses. Consider all the money you receive in a month, whether it be your paycheck, or any other sources of income such as bonuses, side work, tax refunds, or investments. Next, add up all your monthly expenses, from food, and loans, to housing and utilities. From here on out you can subtract your expenses from your income and see how much you have left to work with.

Any money left over after your expenses is what you can use to repay debt or put away into savings. Often, this amount may be less than you expect, which could prompt you to make some cutbacks. See where you can cancel an unused subscription, or spend less money on non-essential items and services to help boost your net income.

Review your bank statements

Often we miss how much money we spend each month because it’s become so easy for us to make online payments or swipe a debit card at the store to pay for certain goods. The convenience of cashless payments has also made it harder for us to track our spending habits.

If you want a better idea of how you’re spending your money, and where it’s going each month, request a copy of your latest bank statements. If you want, you can even review the last couple of months’ worth of bank statements to get a broader sense of what your income versus your expenses might be.

In some cases, you will notice how much is being spent on non-essential items and services, giving you a better sense of how you can make smaller cutbacks that will help get you on track with creating more sustainable spending habits.

Make debt repayment a priority

Debt is a financial burden that follows us wherever we go, and the longer we take to tackle it, the heavier it tends to weigh down on our financial stability. Whatever type of debt you may have, whether it’s student loans, a mortgage, or even personal debt, set up a budget that can help you start repaying it immediately.

The best is to structure it in a way that allows for more important debt to take priority over others. If you notice you have missed a few payments, it’s best to consult with a financial provider or consultant on how to repay your debt before it starts to become an even bigger problem.

Instead of cashing out huge chunks of your paycheck every month towards your debt, hoping to pay it off faster, start with small increments each month. It’s better to calculate your debt and establish a repayment structure that can help form sustainable financial habits in the coming year.

Set up a savings goal

It’s possible to have a savings goal even if it might feel like your paycheck is being stretched too thin each month. If you’re in a position where saving up is not necessarily a priority, start with something small that will help foster healthy financial habits.

You can set up an interest-bearing savings account with your financial provider, or depot cash into investments and mutual funds. Saving should become a natural habit, as it helps teach you to take more responsibility for your spending and how you manage your money.

The hardest part is to start, and whether you’re putting away $50 or $500 each month, it’s better to start sooner than later. Set yourself a goal you’d like to reach within a given period, as this will help get you on track with establishing healthier spending and budgeting habits.

It’s also often easier to do something, like saving money, when you have a goal that you’re working towards.

Change the way you think about money

The word “money” can often send many of us in an anxiety-riddled spin, that can either fill us with excitement or dread. Regardless of what you may think or feel when it comes to money, it’s best to adopt a “money mindset” that may help you take on a more positive attitude towards your finances.

Whether you have zero dollars in savings, or $100,000, changing the way you work and saving your money all starts with how you perceive it. This all comes down to how you manage your finances, including your budget and expenses.

If you’re someone who goes about, not caring how much your paycheck can offer you, then you might often find yourself each month not having enough to make ends meet. The best way to change the way you think about any form of money is to keep track of your goals and be more solution-oriented.

Focus on the things that you can control, whether it’s putting cash into your savings, boosting your investments, or even following through with your debt repayments. Each of these steps can help you forage a money mindset that can help you control your spending habits.

Don’t ignore possible side hustles

More and more consumers are taking on a second, third, or even fourth job to help them pay the bills every month. If you’re not yet in that position, but stress that you might need to start diversifying your income sources in the coming months, it’s best to start looking at some lucrative side hustles that can help you bring in a few extra dollars each month.

Start by looking at ways you can monetize the skills you have, or by turning your hobby into a lucrative side hustle. Every person is one step away from trying someone new every day, it just takes a bit of courage and innovation to follow through with it.

You can sell nearly anything on the internet and social media these days, look how you can perhaps get rid of all furniture or items around your house as a way to help boost your savings. Maybe you can sell some of your soft skills as a micro-gig, this will not only help you tap into new opportunities, but it’s also easier to sell something you already have experience with.

Look for passive income opportunities

As mentioned, it’s possible to monetize on skills you already own, but perhaps you can turn to different opportunities to generate a passive income.

Passive income is considered an income you receive every month without having to work for it. This may include things such as owning a rental property, having investments, or receiving interest from your savings.

Whatever you consider being most suitable for your financial position, see how you can quickly turn it into a passive income stream that can help boost your savings or your retirement fund.

Passive income doesn’t necessarily have to be overly complicated, but it’s best to understand what works for you and what you can afford at the moment.

The bottom line

Knowing how to properly work with money will only become increasingly important in 2023 as the cost of living keeps climbing. Though there is a lot of uncertainty over what to expect in the coming year, it’s best to be prepared, and foster sustainable financial habits that will help keep you goal-oriented and ensure you can build a healthy relationship with your money next year.

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Thanks for the sound words, @pierre! Yes, money is as tight as ever in my household. Prioritizing paying off debt and saving what I can in 2023!

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thank you for the post, i always try to put a little money away each paycheck and only use credit cards when i have to

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Great points Pierre…and time proven!

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