Top 7 Financial New Year’s Resolutions | NerdWallet

Hey y'all, welcome back to the channel. I'm Nikita and happy new year! Whether it's changing your workout routine, saving more, or committing to diet improvements, many of us set new year's resolutions as a way to start the new year off strong. And while my team at NerdWallet and I probably can't help you make it to the gym or change up your diet or anything like that, we can try and help you start the year off right with a strong financial strategy for 2023. Here are seven financial new year's resolutions to start the new year off right. First up on the list is to create a monthly plan to best take advantage of credit card rewards. Some popular cashback credit cards offer bonuses that typically rotate quarterly. Be sure to activate those and track where each card offers a reward using a note, excel spreadsheet, or any other tracking system that suits you. Because I don't know about y'all, but I'm definitely guilty of getting the check at a restaurant or checking out online and just completely forgetting which card I'm supposed to be using to get a bonus. So a clear spending plan will help you track this in one centralized location. And if you share your finances with a partner, be sure that you both have access to the spending plan to maximize benefits and effectiveness even further. Second on the list is to make your money do work. It's okay if you can't or you don't want to invest right now, but that does not mean your money should sit idle in a checking account collecting virtual dust. High yield savings accounts can have a big impact on starting and growing savings. It's important to understand that not all savings accounts are created equal. That default savings account you got when you opened your first checking account back in high school, it's probably not doing you any big favors in terms of interest rates. Your savings account balances and investments can grow more quickly over time through the magic of compounding. Compound interest is the interest that you earn on both your original money and on the interest you keep accumulating. Essentially, compound interest allows your savings to grow faster over time. For example, if you put $5,000 into a savings account with a 2% annual yield compounded daily, you'd earn $101 in interest the first year, another $103 the second year, and so on. After 10 years of compounding, you would have earned a total of $1,107 in interest. We have this cool, fun compound interest calculator at nerdwallet.com that you can kind of play around with and adjust to fit your deposit amount and prospective new high-interest savings accounts interest rate. Our third financial new year's resolution recommendation is to do an annual checkup on your insurance to make sure that A, you've got the coverage you need and B, you're not paying too much. Over the past couple of years, building costs have ballooned due to inflation, labor shortages, and other impacts to production lines. Is your house now underinsured? Might be worth chatting with an agent about just to make sure. The same is true for your auto and medical insurance as well. If you have financed or leased the vehicle, just be sure to give your lender a heads up. And from a medical perspective, costs and benefits can change every year and your own health and needs can change too. It's worth confirming that you're getting the coverage you need at a good price, so be sure to shop around during open enrollment. A good rule of thumb is to always shop around with at least three companies for a new insurance policy to make sure you're still paying the best rate and getting the best coverage for your needs. And of course, always make sure that your new policy has taken effect before dropping your old one so you don't run into any coverage gaps. Our fourth recommendation is to re-evaluate your student loans. A lot has changed in the student loan world over the past few months and now is a great time to make sure your repayment plan still aligns with your goals. This could mean creating a plan to pay down your debt faster or exploring refinance options. You may shop around and realize you could save yourself a few thousand dollars in the long run by refinancing at a lower interest rate. Just keep in mind that refinancing alone will mean closing out the old loan and starting a new one. This could mean a temporary impact to your credit score when applying for the new credit and also a potential ding to your score if your student loan was the oldest account on your credit report. Speaking of credit reports, a lot of folks want to kick off the new year by getting rid of credit card debt. So fifth on the list is to consider consolidation as a first step to getting a lower rate on that debt. Debt consolidation rolls multiple debts, primarily high interest debt like credit card bills, into a single payment. This is a great option to consider if you can get a lower interest rate as it will help you get your expenses organized and paid off faster. First off, consider if a 0% APR balance transfer card will do the trick. The transfer card will often charge no annual fee and offer an introductory 0% period, usually somewhere between 15 and 18 months for transfers. Transfer your eligible debts during this introductory period to maximize savings. You'll likely need good or excellent credit in order to get approved for a 0% interest card, but if you don't qualify, a fixed rate debt consolidation loan is another viable option. You can pre-qualify with multiple personal loan lenders to find the lowest rate, then use the funds from the loan to pay off your debt. Speaking of paying off debt, that is number sixth on the list. We talked a bit about credit card debt and student loan debts, but in general, having a debt payoff strategy and sticking to it is a huge flex in the financial world. Having a strategy can help you with budgeting and paying off debt sooner. Which strategy is best for you depends on your goals and your financial situation, but there are a few common approaches. I mentioned consolidation earlier, but there are other strategies too. Two of the more popular ways to pay down debt are debt snowball and debt avalanche. With snowball, you pay the smallest debt first and then by building positive momentum, the snowball method can motivate you to keep going. With avalanche, you pay the debt with the highest rates first, which helps minimize the amount of interest that keeps building to help you owe less in the long run. For both these strategies, it's important to pay the minimum due on all your debts, so it's just a matter of preference where you want to put the rest. And if you find yourself just staring down a mountain of credit card debt that you can't pay, a nonprofit credit counseling agency can work with you on a debt management repayment plan. Visit the National Foundation for Credit Counseling or the Financial Counseling Association of America to find reputable agencies. For-profit companies offering credit counseling likely won't be prioritizing your financial goals over their own, so it's important to keep that in mind when building a debt management plan. And our final recommendation is to create and stick to a budget. If you watched our last video, Chanel walked us through taking on a 52-week budget challenge. Be sure to check that video out to really deep dive into budgeting. And whether you choose to rise to the 52-week challenge or not, budgeting is still a great way to create financial stability by tracking expenses and having a plan for bills, savings, and emergencies. Once you've determined your long and short-term goals, there are a ton of budgeting methods and various apps to help simplify the process. But you'll want to follow these five steps regardless of which method you choose. Know your net income. Understand your fixed expenses. Calculate your variable expenses. Compare your income and expenses. Review the budget regularly. And this last step is really important, and a lot of people forget it in the budgeting world. You can't just create a budget and then forget about it and think it's good for the foreseeable future. You'll need to review it regularly and update it if your finances change or if items, such as the gym membership you signed up for on January 1st, are no longer relevant. With the holiday season officially behind us, now is a great time to reflect on what went well last year and what we'd like to do differently in the new year. I hope you found these seven financial resolutions helpful. Maybe you'll choose one or maybe several are calling to you. The key is to figure out what you want for yourself and your family in the short and long term and then go from there. Everyone's goals for the year are different. Just remember, when making any financial goals, to use the SMART template. Specific. Your goals should be specific, including exact dollar amounts when possible. Measurable. Every goal should be trackable. Attainable. Make sure your goal can realistically be attained in a fixed amount of time. Relevant. Any money goals should make sense with your personal values. Time limited. A little pressure is good. Set a deadline to help keep you on track. Let's keep that SMART approach in mind so we can be a part of the resolution success story. We've got this. It's time to embark on a successful and prosperous new year. Happy 2023. I don't usually set resolutions, but I have been the past couple of years. Last year's was to practice Spanish more. So digame en espanol. And this year, it's making my money work more for me by leveraging high interest accounts and maximizing my investments. I would love to know your resolution. Drop it down in the comment below. See you next time. Bye.