With the new year just days away, you may find yourself thinking about your goals or plans for 2023 – some tried and true New Year’s resolutions. And while resolutions typically tend to be healthcare or wellness focused, there are plenty of other avenues to examine. For example, you may find it a good time to shift your focus to your financial well-being.
While setting resolutions involving personal finance is not a new concept, it is gaining momentum as we approach the new year. And for good reason – with today’s inflation rates and accumulating debt, it’s hard for financial wellness not to be top of mind. In fact, research shows that two-thirds of Americans plan on making a New Year’s resolution related to financial goals for 20231.
If you’re looking to start the new year right by reviewing and revamping your financial plan, you’re in good company. And for retirees adjusting to a limited or fixed income, there’s never been a better time to reassess finances. Consider these resolutions to help ensure long-term financial confidence for 2023 and beyond.
1. Tackle Debt
Let’s start by addressing the most common financial New Year’s resolution: paying off debt. According to a survey, 53% of Americans resolve to pay off debt over the coming year1. What’s more, Baby Boomers are more likely to want to pay off debt than any other generation, with 63% ranking it their top priority for 20231.
According to the National Council on Aging, the largest sources of debt among seniors are medical debt, credit card, and housing debt. And even for retirees on a reduced or fixed income, there are plenty of ways to prioritize paying off debts. Since credit cards tend to carry high interest rates, making payments toward your balances is the best place to start. Once you’ve addressed credit card debt, you can shift your focus to medical debt and making more aggressive payments towards your mortgage balance.
For homeowners ages 62 and older, tapping into home equity with a reverse mortgage could be a viable way to eliminate monthly mortgage payments altogether. If you have an existing mortgage balance on your home, the money from a reverse mortgage is first used to pay off that loan. And since there are no monthly mortgage payments required2 on a reverse mortgage, you can free up more cash to use as you see fit – such as helping with healthcare expenses or eliminating other debts.
2. Build Up Emergency Savings Fund
Whether you refer to it as a “rainy day” fund or emergency savings stash, having a stockpile of savings for unexpected costs can help you be better prepared for the unexpected. However, many adults and retirees are finding that their savings are insufficient. A 2022 Federal Reserve Board report found that nearly one-third of adults would not be able to completely cover a $400 emergency expense in cash3. With this in mind, it’s no surprise that emergency savings funds are becoming more prevalent.
In fact, a survey found that 34% of Baby Boomers reported building an emergency savings fund to be the goal of their 2023 financial resolution1. From automatic transfers and deposits to identifying opportunities to save, there are plenty of ways to redirect more cash to your emergency fund. Even if it’s just $50 or $100 at a time, a steady stream of cash flow adds up over time and can go a far way in cultivating your savings.
3. Decrease Online Spending
Amidst the pandemic and periods of quarantine over the past 3 years, Americans of all ages have taken to the online shopping revolution – including seniors. In fact, market research found that online spending by Americans ages 65 and older climbed 60% from 2019 to 2020, with the average senior spending nearly $187 per month online4. From the time savings, to lower prices, to convenience, and a wider variety of product options, the popularity of online shopping only continues to grow. And while it’s easy to simply click “add to cart” and place an order in a matter of clicks, online shopping can also lead to hasty or impulsive purchasing.
Slowing online spending is a major opportunity for retirees looking to reexamine their financial well-being in 2023. Next time you head to your favorite site, consider your budget before clicking through to check-out. Once you’ve paid your monthly bills, how much are you left with in discretionary income? Are there better ways to allocate these funds? By taking a minute to consider your spending habits, you may find yourself willing to wait until the following month to purchase an item – or realize you really don’t need it after all.
4. Identify Ways to Generate Income
Just because you’re retired does not mean you have to stop making money! With retirement comes more time and freedom to do what you want – and for many people, that may still involve some form of work. Whether it be a part-time gig or hobby that can make you some money, there are plenty of ways to make some extra cash in retirement.
Even small amounts of income can make a difference. After all, when you generate income in retirement, it reduces the amount you’ll need to withdraw from your investment portfolio – so you can preserve those assets longer.
5. Plan for Inflation
If you’ve recently gone to the grocery store, filled up your car with gas, or even picked up a prescription at the pharmacy – you’ve likely noticed an increase in costs. This inflation has been persistent throughout 2022, and according to a study, is a concern for 81% of those with financial New Year’s resolutions for 20231. And after years with relatively low inflation, retirees are understandable concerned about paying higher prices nearly everywhere.
Fortunately, planning ahead for this anticipated ongoing inflation can help you maximize your dollar. For instance, start by making necessary adjustments to your budget. While monthly expenses may have been somewhat fixed in the past, inflation has likely impacted essential services and necessities you rely on every day. Adjusting your budget and spending plan can help you more realistically keep up with these increasing costs. You can also assess your current nest egg and savings, factoring potential inflation over the next 10, 20, or even 30 years for a better idea of how your savings will stack up. Keep in mind that overall inflation rates will likely level out eventually – and will not necessarily rise at such a sharp rate.
While approximately 80% of New Year’s resolutions fail5, your financial retirement resolution does not have to fall into this statistic. The best way to set – and keep – your resolution for 2023 is by making it realistic and attainable. And when it comes to finances, there is no better place to start than with your budget.
If you find that your budget is not as strong as you’d like it to be or you could use an additional source of retirement income, tapping into your home equity with a reverse mortgage could be a powerful solution. With homeowners aged 62 and older accounting for an all-time high $11.58 trillion in housing wealth, you may be surprised to see just how much equity is in your home.