5 Ways To Improve Your Finances For Financial Wellness Month

January isn’t just the start of a new year, it’s also National Financial Wellness Month. Different from Financial Literacy Month in April, Financial Wellness Month is the time to prioritize your finances and set yourself up for success the rest of the year when it comes to your money. That said, here are five tips you can use to improve your financial wellness and start the new year on the right financial foot. 

1. Set Your Goals For 2023

New year, new goals! Setting your financial goals and adjusting your budget to meet them can be some of the most important things you do at the start of the year. Two specific savings goals you might want to consider include:

• Planning for major savings goals: Planning to increase your emergency fund, cover a car repair, or save for a home? Make sure all of these are accounted for as part of your budget for 2023. One recommendation is to take all your savings goals for the year and divide the total amount you’d need or want to save by 12. Then, set up an automatic transfer to set aside that amount monthly, ideally to a separate savings account. Using separate savings accounts enables you to track progress more clearly, and helps you avoid withdrawing from the wrong account (or goal). If you can’t fit your determined contribution into your monthly budget, you’ll want to revisit your goals or monthly spending to adjust.
• Start or update a “sinking fund”: A sinking fund is a dedicated account you use for recurring, but infrequent expenses – think birthday or wedding gifts and holiday shopping. By contributing monthly to a dedicated account, you’ll be much more prepared for those expenses when they pop up every so often.

When setting your goals, take advantage of any opportunities you may have to automate your savings. This might include using your employer to send a portion of your paycheck to a separate savings account via direct deposit or the Smart Savings feature from Rocket Money^SM to automatically set savings aside using an amount you choose or little-by-little based on your spending habits.

2. Budget For The Things That Are Important To You

While it’s easy to think of a budget as something that’s designed to restrict your spending, it’s also a way to prioritize what matters to you most. Using a budget can be beneficial to your financial health in several ways, from helping you pay down debt to making sure you can reach your savings and investment goals. You can easily use Rocket Money to allocate spending for certain expenses, and even create a custom category to make sure you have funds for your favorite hobby or your guilty pleasure.

To create your custom budget using Rocket Money, simply click the gear icon on the top left of the app or visit the Spending tab where you can select “Create a budget.” Not only is the practice of creating a budget helpful to align your spending to your goals, it’s also a great practice to improve financial wellness and reduce financial stress by helping you to avoid surprises in your cash flow.

3. Make A Plan To Paydown Any Debt

If you’re like many Americans, debt (particularly credit card debt) might be higher in the new year after all that holiday spending. To get ahead, list out all your debts including their remaining balances, minimum payments, and interest rate. Then determining how you’d like to accelerate your debt payoff; two popular ways are the avalanche and snowball methods.

Using the avalanche method, you’ll apply any extra payment (beyond the minimum payment across all your debts) to the debt with the highest interest rate. Once that debt is completely paid off, you’ll move on to the next highest interest debt, and work your way down the list. This will save you the most money over time.

Using the snowball method, you’ll apply any extra payment to the lowest balance debt. Once that debt is paid off, you’ll move on to the next lowest balance debt. This will cost you more in interest than the avalanche method, but you’ll likely wipe out a single debt much quicker.

4. Update Your Retirement Contribution

Did you know that the Internal Revenue Service increased the amount of money you can contribute to retirement accounts for 2023? For most workplace retirement accounts, including a 401(k), 403, most 457 plans and a Thrift Savings Plan, you can now contribute up to $22,500 in 2023, a $2,000 increase from 2022. If you’re age 50 or older, your “catch up” contributions also increased from $6,500 to $7,500 (making the total contribution limit $30,000 if you’re age 50 or older).

For Traditional and Roth IRAs, the contribution limit increased from $6,000 in 2022 to $6,500 in 2023. Keep in mind you can contribute to both a workplace retirement account and an IRA up to their respective contribution limits within the same tax year. In other words, you’re not limited to one or the other to get the tax benefits of both accounts.

If you can’t meet the maximum contribution, that’s fine too. Simply aim to increase your contribution rate by 1% – 2% of your income every year. While 1% might not sound like much, it can have a large impact on your investments and retirement savings over time.

5. Double Check Your Credit

The last action item on our short list is to do a full review of your credit report. More than just your credit score, your credit report will provide details on your payment history, debt balances, accounts in your name and more for the past 7 years. Because it is so comprehensive, in addition to understanding how these factors impact your credit, it’s also an important exercise to help spot potential instances of identity theft. If something in your credit report looks suspicious, or there’s an account you don’t recognize, you’ll want to reach out to that institution or the respective credit reporting agency for additional detail. If necessary, they’ll also be able to protect you, for example, by requiring you be reached out to when opening new credit lines in the future.

You can easily view your full credit report using Rocket Money or download it for free at AnnualCreditReport.com.

Want to stay on top of your spending and find savings the rest of year? Get started with Rocket Money today to set up your custom budget, track your net worth, and more!