With a new year comes new opportunities to advance your financial situation. Even though we’re already into 2023, it’s never too late to begin planning your financial goals for the year. Here are some things to keep in mind.
The State of the Market
2022 was a whirlwind. And, so far, while 2023 is showing some signs of recovery the economic outlook is very uncertain.
Inflation likely peaked sometime during the third quarter, but it remained high throughout the rest of the year and into 2023. Supply chain disruptions aren’t helping, and it’s likely that prices will continue to remain above the Federal government’s 2% target until sometime next year.
A possible recession is looming, and the GDP growth forecast supports that. Our economy is predicted to fall into a shallow recession during the first half of the year.
Right now, the Fed is combatting inflation by raising interest rates. While that may be effective in staving off a recession, it’s not helping our economic growth. Everything seems unreasonably expensive at the moment, which is why it’s so important to have a firm grasp on your finances.
Another key factor is the current job market. Unemployment rates are currently estimated to rise slowly over the next three years. S&P Global predicts that we will reach 4.8% unemployment by the end of 2023.
Begin to Understand Your Finances
There are many things consumers and small business owners can do to plan for a healthy, sound financial future. To get started, you need to first understand how much money you’re making and how much you’re spending. We recommend creating a personal budget.
Next, you should work to control your spending. One tip that’s evergreen is to save money where possible. Go generic, set a goal to only eat out once a month, or avoid a trip to Target when you’re bored. Look at your credit card or bank statements to figure out where you’re spending money each month, and see if anything can be cut back.
Set (and Stick To) a Budget that Makes Sense
A budget is never one-size-fits-all. It’s important to create one that’s unique to your financial situation and takes into account your financial goals. Here are some tips for creating a budget that will enhance your financial life:
- Accurately calculate your current income.
How much money do you make and how much money do you take home? Both are important numbers to keep in mind when planning your budget — especially as tax time looms.
- Track your spending.
This is the part that can be challenging because it’s time consuming. One way to make it easier is to automate it by using an app. There are a lot of options for both paid and free budgeting apps, as well as options for apps that connect to your bank account.
If you don’t want to use an app, you can track your expenses manually. Whether you use the notes app on your phone or an actual notebook, write down every time you spend money and what you spent it on to help better track where your money is going. If you’re spreadsheet-savvy, you can enter your numbers into a spreadsheet to easily calculate your totals and break it into different categories.
- Set achievable goals.
If you won’t be able to fully pay off a loan this year, make a goal to pay more than the minimum every month. Can’t afford a two-week vacation in the Bahamas? Consider a weekend getaway to Myrtle Beach or the Outer Banks. Setting financial goals that aren’t feasible will only contribute to burnout.
- Make a plan for your money.
Once you know how much money is coming in every month, you can use it to plan. A straightforward way to begin is by using the 50/30/20 rule. Allocate 50% of your money for your needs (rent, food, health insurance), 20% for savings and debt repayment, and 30% for things you want.
- Be flexible.
Once you set a budget and start tracking, give yourself some leeway. See how you do the first month, and then find ways to adjust your spending to keep you on track.
Use the Resources Available to You
You don’t have to go through financial planning alone. Take advantage of resources available to you within your community, starting with your bank.
At M&F Bank, we recommend taking advantage of our free, online financial education tool: Smart Money Habits. With different topics like Financial Foundations and Building Financial Capability available, anyone can use this tool to learn how to set themselves up for financial success. Easily access information on basic finances to more advanced strategies for both individuals and business owners.
Looking for resources in your community? Reach out to M&F Bank today to speak to a banker and learn more about your options in NC.