Thursday, January 19, 2023

Kick-start your year with stronger finances 💪

January 2023

It's no secret that 2022 was tough on the finances for many American families. The pressures of rising inflation, increased interest rates and a turbulent stock market all took a toll — but expect 2023 to produce some bright spots, says Jacob Channel, LendingTree's senior economist.

In his 2023 outlook, Channel predicts that consumers will feel some relief from inflation this year, while homebuyers will see a slight cooling in home prices. Don't worry, homeowners — because values have increased so much over the last few years, you'll still hold on to most of your equity.

But whatever happens, the key to a successful year is ensuring your own finances are in the best shape possible. Read on for a plan to get into solid financial shape in 2023

—Ismat Mangla, Editor

Set small, specific financial goals for the new year

By this time in January, all those lofty new year's resolutions you set on New Year's Eve may be losing their luster. But that doesn't mean you should give up on financial resolutions altogether. The key to success? Choosing measurable, specific goals that aren't too abstract in nature. Think "put $50 a month into a savings account" instead of "save more money."

Then, make a point to check in on your goals regularly. This is one area where "set it and forget it" doesn't work. If you have a spouse, make a monthly check-in date to review your finances and see where you stand. Or create a calendar reminder for yourself to regularly track progress.

Unsure of where to start? These four focus areas can help you refine your specific goals:

Tackle high-interest debt

Set a savings goal

Increase your credit score

Talk to a financial planner

Pay down your debt — holiday or otherwise

According to a new LendingTree survey, the average amount of holiday debt in 2022 was $1,549 — a 24% increase from the previous year and the highest in the eight-year history of our survey.

Whether you're still trying to pay off your holiday expenses or are carrying some other debt from earlier in the year, devise a plan for unloading it in 2023.

Here's how:

Choose a payoff method you'll stick with. Try a debt avalanche, where you focus on paying off debts with the highest interest rates first, or a debt snowball, where you start by paying off the smallest balances first.

Consider a 0% balance transfer credit card. These cards can help you save money while paying down your balance faster.

Look into a personal loan. With a fixed repayment period and a potentially lower interest rate than your credit card, a personal loan might be the fastest route to eliminating debt.

Ask your credit card issuer for a lower rate. It really works! A LendingTree survey found that 70% of consumers who asked for a lower interest rate got it.

Pro Tip

"The best debt payoff method for you is the one that you're most likely to stick with. If you're simply all about the math and paying down the debt with as little interest paid as possible, go with the avalanche. If you'd prefer to pick up a few quick, early wins to get you fired up, pick the snowball method. Either one is fine. It's all about knowing yourself and what works best for you. Personally, I'm an avalanche guy, but I totally see the appeal of the snowball."

—Matt Schulz, chief credit analyst at LendingTree

Get ready for tax time

The tax season is right around the corner. Prepping for it now will make everything go more smoothly — and get you closer to that potential refund, which averages $3,651 for Americans who receive one.

Follow our tax prep checklist to help you get started:

Update your address. If you've moved, make sure your employer has your new address so there's no delay in getting your W-2 or 1099 forms.

Gather your information. The process will go much faster if you're prepared with data like your total income, total deductible expenses and taxes you've paid this year.

Consider using a tax professional. If you have a complex situation that might include side hustles, stock grants, rental properties or alimony, it may be worth it to enlist the aid of a professional who can help you save money and do things right.