Try these 3 tips to get better with money in 2023
Increasing savings and paying off credit cards are among the top financial New Year’s resolutions for Americans in 2023, according to a recent Bank of America survey.
But setting money goals can be easier said than done.
“When we think about budgets, we think about something that’s super restrictive and makes our lives really unfun,” says Vivan Tu, a former J.P. Morgan trader turned TikToker who now gives personal finance advice to her millions of followers as “Your Rich BFF.”
However, being smarter with money doesn’t have to be overwhelming. “Budgeting can be really easy,” Tu tells CNBC Make It.
Here are her top three tips for getting better with money in 2023.
1. Follow the 50/30/20 method
The 50/30/20 method is one of Tu’s favorite ways to manage her money because it can make budgeting really easy. It only requires you to track three spending categories and can help you create a budget you’ll be able to maintain.
To try this strategy, start by allocating 50% of your income toward needs like rent and groceries. Next, set aside 30% for wants, such as dining out with friends, Tu says. Lastly, put the final 20% of your money toward savings, investments and paying down additional debt.
It’s OK if you’re off by a few percentage points when divvying up your money. This guideline can help you get started, then you can adjust the numbers according to your lifestyle, Tu says.
2. Balance paying down debt and investing
High-interest debt can easily balloon to an unmanageable amount, and it can be tempting to put all of your money toward paying it down.
However, saving for the future is important too. The earlier you start investing early, the longer you give your money to earn compound interest and grow.
It can feel like you have to choose between the two, but it’s feasible to do both, Tu says.
Start by chipping away at debts with high interest rates, she says. Higher interest rates will cost you more in the long run, so it’s smart to pay those debts off first.
Next, you can turn your attention toward paying down debts with lower interest rates. Since low-interest debt tends to be less costly, you can also start putting money toward investments like your 401(k).
And don’t let market volatility scare you away from investing.
“If you’re planning on holding your investments and being a long-term investor for over 40 years, statistically speaking, the chances of you losing money are very low, and you’re going to be able to grow your wealth,” Tu says.
3. Get an accountability buddy
Whether it’s saving up for a vacation or vowing to spend less money in general, letting someone know about your financial goals can help you reach them.
“My best advice is write it down on a piece of paper. Say it out loud to a friend. Have it be so that it’s not just you who knows about this goal,” Tu says.
It can be easy to dismiss failing to meet a goal that only you know about, but it’s a little more embarrassing when you don’t meet a goal that you’ve told others about.
“We can actually guilt ourselves into being a little smarter with our finances when we’re doing it with a buddy,” Tu says. If you and a friend are both trying to be more successful with money, it can be more fun to do together too, she adds.
And while it can feel taboo to talk candidly about improving your finances, there can be benefits.
“If we all talk about money, we are all better off,” she says. “Having these conversations more openly means all of us get to be better.”
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