Rising interest rates and inflation indicate a looming recession,1 so, now is the time to get your finances ship-shape. With a new year – a financially turbulent one – rapidly approaching, here are four steps for financial fitness in 2023.
1. Review and rebalance your portfolio(s)
It’s smart to review your overall portfolio (including all accounts) and take stock of where they stand at year’s end. Weigh where you stand against your financial goals for 2023 and determine how you can be proactive. You may be willing to have a riskier asset allocation, or maybe you recently made a large investment or a major life change and don’t want as much exposure to risk as you had in the prior year. Consider what best fits your needs and adjust (or don’t!) accordingly. This year you could switch from manual rebalance to automatic rebalancing to remove the emotion from any financial decisions.
2. Take an assessment of all consumer debt
Go through all bank, loan, and credit card statements and any consumer debt or balances you’ve been unable to pay in full. If you have debt, review how you can best prioritize funds to pay it down in the new year. Consumer debt can have a lasting impact on your credit score and your ability to grow your short- and long-term savings if it isn’t addressed as soon as possible. If you have a family or others depending on your income, it might be time to consider a protection-first approach to your 2023 financial plan to provide long-term protection to see through other financial obligations and protect loved ones from shouldering your debt should something happen. This year you could adhere to the rule of only using a credit card as a convenience and pay the balance off in full each month.
3. Now the fun part…Plan your spending
So many of us suffer from the holiday hangover and live in fear of the January credit card bill or bank statement. To avoid that feeling in 2023, review your spending habits in 2022 and organize transactions into a few main buckets. Be sure to also include a “miscellaneous spending” category to account for minor lifestyle spending that might not fall into the “travel” or “gadget” buckets. This exercise might be daunting if you’re tackling 12 months of spending at once, so this is something that is easier done quarterly. Once you’ve evaluated your 2022 spending, see how it lines up with your 2023 priorities and where you might need to make some adjustments. In 2023, you could aim to better plan and anticipate purchases before making them.
4. Meet with your financial professional
As the new year begins and you consider financial goals and priorities, it’s always good to check in with your financial professional. They can help you embark on the best path to achieving these goals and keep you informed of your policies and portfolios along the way. Human guidance is a valuable catalyst for making grounded money moves and can provide peace of mind knowing someone is guiding you with your best interest in mind.
As 2023 begins, carve out time to reflect, evaluate the current environment and where you stand, and, with the help of your financial professional, identify the goals that will strengthen your financial foundation in the year ahead.
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