10 Financial Habits to Start in 2023
The New Year great time to look back on the past year to observe what worked for us and what we hope to improve in the year to come.
Whether you’ve made great headway in your financial life or feel like your financial wellness is in dire need of some love, adopting these ten habits will transform your financial health in 2023.
#1. Keep a spending journal.
Do you ever think, “where is all of my money going?” If so, you are not alone. It may sound overly simple or burdensome, but writing down what we spend is an extremely eye-opening practice. 95% of my clients are surprised (even shocked!) by what they are actually spending.
We often spend out of habit. It becomes so automatic that we don’t even realize we are doing it.
Writing down what you spend in an actual journal or in an app on your phone will help you get really conscious about where your money is going. While you might initially be hesitant to face the numbers, just knowing where you stand can take a tremendous weight off of your shoulders.
#2. Use the 48-hour rule.
Despite the best of intentions, you might find that you aren’t really happy with some of the purchases you’ve made. Perhaps the dress in your closet that you just had to have still has the tag on it years later. Or, you feel terribly guilty after charging way too much on your credit card at a ‘Buy One, Get One’ sale.
For an easy fix, I recommend implementing the 48-hour rule. Just as it sounds, the 48-hour rule means giving yourself 48 hours to decide if you want to make a purchase.
Based on your spending and goals, set guidelines for when to implement this rule. For example, you might choose to use the 48-hour rule for any expense over $100, $200, or $25.
Whatever it is, you will be surprised to find that once you leave the store (or website) it’s often not even worth the trip back to get the item you wanted. If it is, chances are you won’t regret the purchase.
The 48-hour rule takes the impulse out of our spending and helps us get really intentional about where our money is going.
Fun bonus: The threshold you choose for the 48-hour rule might also be a great threshold for conferring with your partner about a purchase. It can save a lot of stress and surprise when couples decide on a number and discuss any expenses above that with one another.
#3. Build a rainy day fund.
A rainy-day or emergency fund is an amount of money that you set aside in case of an emergency or an unexpected expense. It prevents you from having to take on credit card debt in the event of the unexpected. It also provides peace of mind. You can rest assured knowing that you have set up a system to protect yourself.
To figure out how much money makes sense for your rainy day fund, you will want to take yourself through some personal “emergency situations.” How many months of expenses would you like to have set aside in case you lost your job, became ill or [insert personal emergency situation].
While three, six, or even twenty four months of expenses might seem like a huge amount of money to save, it can feel a lot more reasonable if you look at your expenses in the case of an emergency vs. your regular spending. If you lost your job, you might scale back your spending to your most basic needs such as your bills, food, rent, and transportation.
Take that decreased spending number and multiply it by the number of months you’d like to have saved. If you don’t have an emergency fund lying around, you can start to build it each paycheck until your reach your goal by having money transfer over from your checking account to savings.
#4. Start planning ahead with sinking funds.
While some expenses can’t be predicted, others are much easier to plan for and it can save us a great deal of stress when we do plan for them. The holidays are a great example. If you anticipate spending 1,000 on holiday gifts, decorations, and entertaining, why not start saving now to make your life easier?
If you put away money every month starting in January, you would only have to save $83 each month to reach your goal of $1,000 by the end of the year. Isn’t that much more manageable?
This concept is called a sinking fund. You can use sinking funds for any larger infrequent expense including vacations, wedding gifts, or a new TV. By putting away a certain amount of money each month or each paycheck, you can avoid the stress of depleting your checking account or taking on credit card debt when these expenses arise!
Looking ahead into 2023, what items can you start saving for now? How much do you need to put aside each month or each paycheck to reach each goal in time?
#5. Pay yourself first.
Now that you have taken steps to start building your rainy day fund, you can make it even easier by automating your savings. Once you know how much you want to transfer to your emergency fund or other savings goals each month, set it up as an automatic transfer from your checking account. That way you don’t have to think twice about it.
Not only does this give you more time to fill with whatever you want, it also takes willpower out of the equation. You will be 100% successful in achieving your savings goals and will have more willpower for your other life endeavors.
#6. Earn some interest.
Albert Einstein called compound interest the 8th wonder of the world because it allows your money to grow exponentially by earning interest on interest. Your money builds on itself!
If you are putting savings aside for your emergency fund and goals, why earn a measly .01% interest rate at the brick and mortar banks when you can earn ~2% on your money in a high interest online savings account.
Earning 2% from a savings account might not sound like much, but if you keep six months of expenses in liquid funds and you estimate you would spend $2,500 per month in the case of an emergency, that’s $15,000. At 2%, your account would earn $300 in interest vs. $1.50.
For your longer term goals, you’ll want your money growing by investing in the market.
Always ask yourself: how can I let this money work for me instead of keeping it in cash or in a savings account with a minimal interest rate?
#7. Make being fabulously FRUGAL a game.
Being fabulously frugal is about maintaining (or increasing) your current lifestyle while decreasing the cost. It might sound impossible but once you get the hang of it, you will find ways to do this in many areas of your life!
First, you have to get clear on what you want. For example, I love spending time with friends, having great conversation, drinking good wine, and eating delicious food.
This can get really expensive (especially with the wine markup!) and sometimes in loud restaurants, I can’t even hear my friends! I did some brainstorming and decided to hire an up and coming chef to cook in my home. Now that is luxury!
I was able to find a chef to come in and cook a delicious and healthy three course meal for $35 a person. I hosted dinner parties for my friends, and with New York City prices, $35 including tax and tip was much less expensive than dining out. Being fabulously frugal can really be a win-win!
#8. Define your big life goals.
Implementing all of these habits will feel great and you will watch your savings grow. But at the end of the day, that’s much more exciting when you actually know what you are saving for. What is your ultimate goal when it comes to your financial wellness?
Money is just a tool for us to live our best life and that means something different for each of us. It’s a whole lot easier to step away from a sale or opt for a night at home with friends instead of going out when you feel the tremendous benefit and achievement from saving your money.
Are you building an emergency fund that will provide a great amount of financial security? Are you saving to quit your job and start your own business? Maybe you are saving to take a dream vacation or to start a family. Whatever it is, make sure to keep your goals and timeline for achieving them at the forefront of your mind.
When you are giving yourself what you truly want, it doesn’t feel restricting to make supportive financial decisions.
#9. Ask for what you want.
Whether it’s asking for a promotion or raise or negotiating away fees on your credit card bill, you won’t get it if you don’t ask. You’d be surprised by how much in life is negotiable.
You can negotiate your rent, gym membership, cable, and even your dry cleaning bill. If negotiating for your income or expenses sounds too daunting, start small. Everything gets easier with practice.
What are some things you’ve wanted to ask for but have been putting off? Commit to asking for them this week. Do you want your roommate to chip in with the dishes, need a better headset at work, or want to stop paying bank account fees?
Practice having an opinion and asking for what you want. It will help the top and bottom line of your finances in 2023 and beyond.
#10. Create your Dream Team.
If you are like most people, you’d probably rather talk about your gyno appointment than talk about money. Money can be a difficult subject to broach even with our closest friends and family, and we often try to avoid it altogether.
The problem with that is that the people who love us and care about us most can be really supportive in helping us achieve our goals. If your best friend knew you were trying to save money, she might stop inviting you to every sample sale she hears about. If your partner knew you wanted to build an emergency fund, he or she may help you come up with strategies to start saving more.
You don’t have to go at it alone! Confide in your closest family and friends by telling them your big life goals and brainstorm ways they can help you achieve them!
These are the people that love you the most and with them as your dream team, it will be that much easier to succeed!
Plus, when we tell someone we’re going to do something there’s a 65% chance we’re going to do it. If we schedule a check-in with that person, our success rate goes up to 95%. I’ll take those odds!