/industry-wired/media/agency_attachments/2024/12/04/2024-12-04t130344212z-iw-new.png)
/industry-wired/media/agency_attachments/2024/12/04/2024-12-04t130332454z-iw-new.jpg)
/industry-wired/media/post_attachments/wp-content/uploads/2023/06/10-Great-Financial-Decisions-to-Make-in-2023-300x199.png)
Blaming others, the economy, or your circumstances may provide you with some relief, but it won’t change your current financial status. You’re the one who has to take charge of this situation.
Even if you aim to win a lottery, you need to go and buy a ticket (possibly while researching which ticket to buy and where to buy it). In other words, you need to make a financial decision/action.
Here are ten other (a tad more realistic) financial decisions you should make in 2023.
1.Start getting rid of debt
If you have a lot of debt, chances are that interest rates alone are eating up huge chunks of your profit. The problem is that some people get new debt to cover their old debt, thus embarking on a vicious spiral.
So, your first objective should be to get out of debt. There are several strategies you could use:
- Consolidating debt: This means getting one big loan to cover all your loans. This gives you just one loan to focus on makes things easier. Plus, you have a chance to reduce the amount of interest rate that you’re paying.
- Paying off high-interest debt: This way, you reduce the total interest you pay.
- Paying off the smallest loan first: This method helps you eliminate one of the debts quickly, leaving you with a smaller total debt.
Either of these strategies will work.
2.Set long-term goals
The next thing to consider is your long-term goals. People often forget that things like:
- Getting married
- Buying a house
- Having a child
- Retiring early
They are not just major lifestyle changes but also major financial decisions. Sure, some of these decisions are not yours, but you need to discuss them as a couple or a family; however, if you want to take more charge of your life, you cannot postpone this any further.
Start budgeting. Ask yourself, how much would it cost for me to get married? When you get the answer, ask where I am getting this money. This sequence of questions will lead you to all the correct answers.
3.Keep an eye on your credit score
The next thing to consider is your credit score. Simply put, this is your overall creditworthiness. This is a metric that banks and credit unions will use to assess how trustworthy you are with their money. Based on the risk (the higher the score, the lower the risk), they’ll determine your loan terms (APR, loan term duration, etc.).
It takes years to improve your credit score, and just a few missed credit payments may be enough to ruin it. You want to take better care and pay more attention to your credit score.
Some have even taken out loans they don’t need to build up their credit score. A great credit score is an amazing financial safety net for the future.
4.Consider creating passive income
You can only work so many jobs before you’re exhausted or mathematically cannot take anymore. However, you can have infinite assets that generate passive profit. An apartment will yield a rent, regardless of how much you’ve worked that month. The same goes for dividends and some other assets.
Now, you don’t need enough money to buy a whole apartment. There are real estate investment trusts, syndications, etc.
Another thing you could do is go through the list of cryptocurrencies that areexpected to explode soon and put a modest sum there. You won’t miss this money but have a considerable surplus if the investment succeeds.
Intellectual properties are one of the passive income assets available to everyone. A blog post, a YouTube video, a self-published e-book, or a stock photo will generate profit for years. Sure, the profit for individual pieces may be low, but you can have as many as you can create.
5.Track your expenses
You have no idea how much money you’re spending. For instance, an average American spends about $1,100 yearly on coffee. This is a decent sum that you can cut down on significantly, but chances are, you had no idea it was that expensive.
The first step in avoiding a trap lies in knowing there is a trap. So, what you need to do isdownload a budgeting app.
You need to connect the app with your accounts and scan every single receipt (they all have QR codes). This way, you’ll automate your expense tracking, make it more reliable, and ensure you never miss out on entering a payment into the system. Being vigilant is incredibly important and something you can’t afford to miss out on.
6.Become more financially literate
The key to better finances is understanding what you’re dealing with. Robert Kiyosaki states that the biggest difference between the rich and the poor is how they understand money.
- Debt is not a universally horrible thing, and as long as you understand debt management, you can use it for amazing projects.
- You also need to understand your taxes. This is important even for those who outsource this to their accountant.
- Things like insurance are terrifying to many people, but this is a simple procedure, and understanding policies are not that hard.
- We’ve already covered the importance of budgeting, and using the right app can simplify this procedure.
- Finally, you should avoid thinking that you’ll live forever. Estate planning is an important aspect of financial literacy.
Researching each of these topics will already make you much more financially literate.
7.Create a savings fund and an emergency fund
Previously, we’ve talked about the debt loop. This starts with an emergency expense you can’t cover for most people. The best way to avoid this scenario is to get an emergency and a savings account.
Most people believe that savings and emergency funds are essential, but they can’t set aside enough money for them. You can solve this problem in many different ways.
For instance, if you set aside $1 for the 1st week, $2 for the 2nd, $15 for the 15th, and $52 for the 52nd week, you’ll have $1378 in your emergency account by the end of the year. This is not much, but this can be a great start if you lack an emergency fund.
8.Learn how to survey potential investments
Another thing you should learn how to do is survey potential investments. Why is this important? Well, you need to know whether something’s a good idea. However, how are you going to approach this subject? Will you just go to Reddit or a dedicated forum and see what others have to say?
Instead, you need to learn how to read financial reports and statements, find cracks in reviews, and put online comparison tools to good use.
9.Buy a home
Paying rent and a monthly mortgage is not the same, regardless of the cost. First, by buying a home, you gain equity, which you can sell or borrow against. Eventually, you’ll own the entire home, which is never true with a rental place, no matter how many rent payments you make.
If you own your home, you can rent out a part of it and use it to generate a passive income (something we’ve already discussed). This is an investment, and you need to treat it as such.
10.Live slightly below your means
You don’t have to engage in complete austerity to be a bit more financially responsible. When buying a used car, buy a model made six instead of five years ago. It’s not much of a difference in quality, but it’s a huge difference in cost.
No one is asking you to relinquish all your favorite luxuries; after all, you need to remind yourself occasionally what all the hardship is about. However, you can’t recklessly spend if you can’t afford it. Exercise discipline in all matters, spending included.
Take charge of your finances in 2023
By understanding your current financial state and the factors that caused it, you’ll have a much easier job of changing things around. You’ll make the right decisions and develop healthier habits, eventually leading you to the desired outcome.