2022 will be a tough year for many, with high inflation and a falling stock market taking a toll on the personal finances of many Americans. Fortunately, with the new year fast approaching, many are considering their options and vowing to improve their financial situation in 2023.
But New Year’s resolutions can be hard to stick to, even when the world doesn’t throw additional challenges at you. So we’ve put together a list of three practical ways you can start decluttering your personal finances in 2023, along with some of our favorite financial tools that can help you along the way.
First, note that we said part Or your debt, not all. Research shows that the best way to make New Year’s resolutions stick is to set specific, achievable goals. If you’ve spent years getting yourself into debt, it can be very difficult and frustrating to get out of it all at once.
But there are some manageable steps you can take to not only pay off some of your debt, but also prepare yourself to make it easier to pay off the rest later. how? By reducing the interest you currently pay on your debt.
According to WalletHub, the average credit card interest rate is currently 16.27% for existing accounts and 21.34% for new accounts. These unusually high interest rates make it increasingly difficult to pay off what you owe, even if you make your minimum payments on time.
So how do you get the interest down to a more manageable level? Believe it or not, the best option is a little counterintuitive: Open a new credit card.
We know what you’re thinking, but wait a minute! We do not recommend that you open a new credit card to spend more money.Instead, you’ll need to find a card with Introductory balance transfer offer.
Balance transfer credit cards offer a temporary 0% interest rate on your existing debt transferred from other cards. The introductory period can be anywhere between 12 and 21 months, depending on the card.
Transfer your debt to a new card with an introductory balance transfer offer, and you’ll stop paying interest on that debt for more than a year. Even if you continue to pay the same amount as your previous monthly payments, you will reduce your debt because part of your payments will no longer be paying exorbitant interest.
How do I find credit cards that offer balance transfer offers? Just check out CNN Underscored’s list of the best balance transfer credit cards to see which one might be right for you.
The good news is that card issuers are largely back to normal after being stingy about approving people’s credit cards for balance transfers during the pandemic, so it’s now easier to get new cards.But if you get rejected, probably because of a low credit score, apply personal loan is another option.
Interest rates on personal loans may be higher than credit card introductory balance transfer offers, but it’s still probably better than sticking with the rate you’re currently paying. Plus, you don’t have to worry about the interest rate on your personal loan changing after the introductory period, like you would with a balance transfer credit card. Getting approved for a personal loan is also easier because there are options for people with all levels of credit, although the worse your credit is, the more interest you’ll pay on a personal loan.
You can use a personal loan to pay off existing debt, and with a personal loan, you’ll have a fixed schedule to pay off the debt in full so it doesn’t drag on forever. However, if you’re considering a personal loan, make sure the interest rate is lower than what you’re currently paying – otherwise, there’s no point in switching loans.
If you’re applying for a personal loan, there are other factors to consider, so if you’re considering this option, be sure to read our guide on why you might consider a personal loan and how to apply. For more ideas on how to make your debt more manageable in 2023, check out our four steps to getting out of credit card debt.
If there’s one thing the past few years have taught us, it’s the importance of having some sort of savings or emergency fund.
Some people say that as a rule of thumb, you should have three or six months of living expenses saved. But if you don’t have any savings at all right now, don’t try to build up six months’ worth of savings at once. Likewise, your resolutions should be achievable so that you have a good chance of fulfilling them and setting yourself up for future rewards.
So, instead, make your goal that you will start emergency fund for January and add to it Every month in 2023. It could be as simple as keeping a jar on your kitchen counter with a slot in the lid to drop your change in every time you get home. It won’t add a ton, but it’s better than doing nothing.
However, a better strategy is to Open a savings account And have a portion of your paycheck automatically deposited into it every payday.It’s a concept known as “pay yourself first” because you’re saving money for yourself every month forward You start paying your bills instead of trying to save whatever is left at the end.
You might think that opening a savings account sounds like a hassle, but 20 years ago it might have meant going to the bank and spending 45 minutes with the bank employee. But in 2023, you can do it from home in about 10 minutes using any one of hundreds of online savings account options.
Maybe you’re nervous about depositing money in an online bank that you’re not familiar with? Then you might consider an option like the Capital One 360 Performance Savings account that CNN Underscored recently reviewed. You may find other savings accounts that earn more interest, but if you’re looking for a well-established company and an extremely easy and quick way to get started, this is a great option.
Now, if you’ve spent every penny of your income and aren’t sure how to find money to save, you should take a moment in early 2023 to sit down and Make a spending plan.
A spending plan is slightly different from a budget because it allows you to choose what you want must Spend money every month and then set you free to do whatever you want with the rest of the time. (Also, thinking about a spending plan is more fun than creating a budget. Everyone likes to spend, right?)
If you don’t know how to create a spending plan, we have a spending planning guide that will walk you through it step by step. If you can’t find a way to cut expenses to make room to save, check out our ideas on how to cut three major household expenses in just 30 minutes.
Credit scores can be scary and confusing, and there’s a lot of misinformation about how they’re calculated and what factors affect them. But one thing everyone knows for sure is that when it comes to your credit score, higher is better. In modern life, your credit score affects everything from how much you pay on your car loan to whether you can get a mortgage to buy a house.
So how do you improve your score? Well, like everything else on our list, you can’t go from a bad score to an excellent one in one fell swoop.but you don’t need to have perfect Credit scores make a difference. While higher is better, even a high score will open you new financial doors that an average score can’t.
Of course, the first step to improving your credit score is know what your score is. CNN Underscored’s guide on how to check your credit score has several online options, many of which are free, and some of which you may already have access to without even knowing it.
Once you know your credit score, how do you tell if it’s good, bad or something in between? The answer is that it depends on the credit score you are looking at. That’s right — to make things more complicated, there are several different credit scoring models used by different companies. But don’t worry, because our guide on what makes a good credit score has it covered for you.
Once you know your credit score and where you stand, the best way is to increase your score The goal for 2023 is to make sure you pay all your bills on time each month. Paying on time is one of the biggest factors used when calculating your credit score. If debt is dragging down your score, paying off some of it using our tips at the top of this story will also help boost it.
Finally, while you should be wary of no-name “bad credit repair” services, one service you can safely use is Experian Boost, which is run by one of the three major credit bureaus. Experian Boost can track good payment histories for services that don’t normally show up on your credit report — such as your utility or streaming service bills, like Netflix — and boost them by adding them to your credit file. your score. Best of all, it’s free.
One more note: If you’re a renter, consider buying a Bilt Mastercard. You can use it to pay rent at no extra cost, and earn rewards along the way. Even better, when renting at a Bilt Alliance property, you can choose to have your on-time rent payments automatically reported to the three major credit bureaus, which is a great way to build (or rebuild) your credit. Best of all, Bilt Mastercard has no annual fee.
Here are some financial resources from CNN Underscored to help you achieve your New Year’s resolutions:
You can find all of our personal finance stories on our CNN Underscored Money hub every day.