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Improving your diet and health are common New Year’s resolutions, but improving your financial health should be a priority, too.
“What people don’t realize is your finances really affect every part of your life — your relationships, how you feel about yourself,” says Crystal Rau, certified financial planner at Beyond Balanced Financial Planning. “And so, just like going to the gym and feeling better about yourself, focusing on your finances can really do a lot to have a better year.”
Here are eight ways to save more this year.
1. Automate everything
You can’t forget to save if it’s automated. Whether it’s your 401(k) contribution taken pretax from your salary, or automatic transfers from your checking account into a savings account or money market account, automating will help you save without even thinking about it.
Lauren Zangardi Haynes, CIMA, certified financial planner at Spark Financial Advisors, says your employer may be able to also split your paycheck so it goes into both your checking account and a savings account.
“And then you can automatically transfer that money to an investment account, or to an IRA, or to a Roth IRA,” Zangardi Haynes says.
2. Make sure your cash is earning a high yield
Savings yields are the highest they’ve been in years at top-yielding banks. With that said, depending on where you’re looking to bank, you might not find these top yields. Generally, you’re going to find them at Federal Deposit Insurance Corp. (FDIC) online banks.
3. Spend strategically
During this time of high inflation, and preparing for a possible recession, you might want to consider putting off making unnecessary purchases. You can also wait for sales or consider buying generic products instead of store brands.
4. Evaluate your banking
Review your savings account to make sure you’re earning a competitive annual percentage yield (APY). It’s going to be difficult to keep up with inflation. But a high-yield savings account at a competitive bank is your best option for an emergency fund or other cash you might need on short notice.
Also, take a look at your checking account. You should be able to find a way to avoid fees if you’re incurring those by going under a required minimum balance. Ways to avoid monthly service fees include:
- Finding a bank that doesn’t charge one.
- Having an account that has a low minimum balancement requirement.
- Choosing a bank that allows your recurring direct deposit to waive the monthly fee.
5. Attack your debt
Make paying off debt a priority, if you have any. The interest you’re paying on a credit card is likely a lot more than what you’re earning on a savings account. (Balance transfer cards or zero percent introductory APR cards are exceptions.)
“If you have any credit card debt, you need to pay that off immediately without even considering anything else,” says Amy Hubble, CFA, certified financial planner at Radix Financial LLC.
Credit card rates will probably move higher this year with the Fed planning on raising rates in 2023.
Paying off your debt and not running a balance are the only sure ways to avoid paying credit card interest.
6. Maximize your cash back
When you make your purchases in 2023, make sure you’re being rewarded for them with cash back.
Weigh whether you’d be better off earning more cash back with a credit card that has an annual fee but higher cash-back rewards, or a no-annual-fee card that has a lower cash-back percentage.
Most bank debit cards don’t let you earn cash back. So in most cases, using a credit card for purchases is going to help you save money throughout the year — as long as you don’t carry a balance. Credit card companies will often let you apply cash back toward your balance, or some may let you directly transfer it to your checking account.
There’s more to it than just choosing the right card.
Credit card shopping portals are also places where you can potentially maximize your cash back. By going through your credit card’s website or through a site such as Rakuten, formerly known as Ebates, you can potentially earn more than your usual cash back. On a site like Rakuten, you’re earning cash back in addition to what you earn on your cash-back credit card.
7. Evaluate your budget
The new year is a great time to make sure you’re not overpaying or paying for monthly items that aren’t being used. Go through your budget — or monthly expenses if you don’t have a budget. It’s easy to start a budget — and it can help you maximize your savings. See if there are areas of opportunity, such as cutting back on dining out or on coffee or other spending, that add up over time. Also, go through your budget and try to renegotiate items, Rau says.
“I check our insurance just to make sure we’re still getting the best rate for the coverages that we’re carrying,” Rau says. “It’s just about doing a reset every year, just to make sure you’re getting the best deal and you’re taking advantage of all those things that are offered to you.”
8. Review your employee benefits
Even though the open enrollment period is probably over, you may still be able to adjust some options — such as how much you contribute to your employer-sponsored retirement plan, like a 401(k).
Adjusting your withholding for taxes or how much you’re putting away for retirement — which may reduce your taxable income — is a way to potentially save money, Rau says. Consult with a tax adviser to make sure that your strategy makes sense to save money on taxes.