12 Ways to Improve Your Finances in 2023

Happy New Year!

The turning of the new year brings two things to mind for a lot of us:

1. Whoa, I spent too much money last month/year
2. How can I improve my finances this year?

I’m not a big fan of new years resolutions (most don’t stick).

But I believe in habitual change — deciding something is worth pursuing and taking steps toward that objective every day.

Making better daily money decisions should be a habit we all incorporate into our lives.

If January 1st is the right start date for you, go for it. 

This list aims to inspire you to level up your financial security, build a sturdier wealth foundation, and enable more career flexibility and freedom in the next decade. 

Think of these ideas as long-term improvements to last beyond 2023.

1. Plan for Uncertainty

I’m always struck by how immediately most Americans feel the impact when the economy sours. It should be no surprise, considering more than two-thirds live paycheck to paycheck. 

There’s this repeated storyline that parallels economic cycles. As the macro situation improves and prosperity rises, people tend to spend more, borrow more, and make themselves more vulnerable.

Do the opposite — spend less or the same, owe less, and become more hardened.

Then take steps to become self-sufficient without full-time work. 

When the economy goes bad, be prepared to pounce on opportunities. 

Even though the specific timing of COVID-19 and the financial crisis of 2008-2009 were unpredictable, we should always anticipate that an event (global or personal) can occur tomorrow that could jeopardize our economic security. 

Instead of trying to predict the next challenge, know that something will happen and prepare, regardless of timing.

Here are a few ways to prepare for inevitable challenges:

• Reduce debts and recurring expenses
• Increase cash on hand and grow your emergency fund (more palatable now that savings rates are higher)
• Avoid lifestyle inflation (don’t automatically increase spending when you get a raise)
• Create multiple income streams to reduce reliance on your primary income

Every dollar of reduced debt and every extra dollar saved or earned improves your defenses. Remember that in 2023.

Read more: How to Prepare for the Next Crisis While Times are Good

2. Test a New Idea

I took the first step in creating this blog in September 2013. 

Today, it’s my full-time gig.

My blog empowered me to leave a career I didn’t love and still support my family. 

Upon telling friends and coworkers about my plan to be self-employed, the most common response was, “I want to work for myself too. But I don’t have something to do“.

Is there a side project on your mind — like a hustle, book, or business idea — that won’t go away?

Test it out. One step isn’t a full commitment.

Plan a little and do some work. Invest some money. $100-$500 can go a long way. 

Don’t tell people or post your shiny new website on Facebook. Don’t sign a 5-year lease for a cute storefront. 

Online stores are cheap, do that instead.

Take a few more steps, and you may learn you don’t enjoy your new project or are not excited enough to prioritize the time. 

It’s OK to quit.

But you might gain momentum and motivation to continue. 

You won’t know until you try. The small investment could pay off big. 

Assuming you want to earn money from your new project, prioritize that from day one.

Focus on the activities that lead to earnings. Forget about details that suck away your time.

Progress is better than perfection.  

Read more: Start a Side Business to Empower the Future You

3. Create a New Income Stream

Warren Buffett once said to never depend on a single income.

Who would have guessed that a global pandemic could badly disrupt so many industries? Travel, restaurants, movies, etc.

2020 was an anomaly, but even seemingly secure jobs can go away. Yours and mine included. 

Creating secondary income streams has the double benefit of income diversification and building wealth.

Additional income does not detract from primary income — it’s complementary.

How you create new income streams depends on your skills, available time, knowledge, current wealth, and personal situation. 

I prefer passive income streams because they require less of a time commitment. But any additional income this year will improve your finances. 

Here are some ideas:

• Savings account yields have risen. Put idle cash to work!
• Explore high-yield savings alternatives 
• Get a second job (still works)
• Start a side business (see #2)
• Invest in websites
• Freelance or provide online gig services via sites like Rover, Upwork, or Fiverr
• Buy an out-of-state rental property
• Invest in crowdfunded real estate (Fundrise and EquityMultiple are my favorite platforms)
• Buy dividend stocks

Get creative and start earning more money. It’s worth it, even if you start small.

Read more: Small Investment Ideas to Cultivate Wealth, Alternative Investment Ideas for Asset Diversification

Please note: This is a testimonial in partnership with Fundrise. We earn a commission from partner links on RetireBeforeDad.com. All opinions are my own.

4. Make a Mistake

2022 was not a good year for cryptocurrency.

You saw the headlines about FTX, but others went belly up too.

Prices crashed as fast as 10,000 digital coins materialized out of thin air. 

Anyone who followed the hypnotic internet mansplaining and bought into Bitcoin at $40,000 or above learned a harsh lesson. 

Hopefully, those mistakes made them more thoughtful and skeptical investors. 

Will crypto come back in 2023? ¯\_(ツ)_/¯

Conservative investing will make you wealthy over time. Be persistent — always be investing (See #5). 

But don’t be afraid to take some risks with small amounts of money.

If you’re right, you can earn a nice return; if you’re wrong, notch one up for experience and wisdom.

Sometimes we need to learn the hard way.

The knowledge gained from making a financial mistake in 2023 could be worth many times the loss 20 years from now.

Failure is another stepping stone to greatness. ― Oprah Winfrey

Read more: It’s Only Worth What Someone Else Will Pay

5. Implement Regular Investing

One way to significantly increase the likelihood of becoming wealthy is to invest regularly. 

Employer-sponsored tax-advantaged plans are the easiest way to do this. If your employer offers one, max it out if you can — start or increase contributions at a minimum.  

For those without employer plans, use an IRA or Roth. If you can afford to front-load, do that (see below).

Otherwise, use a dollar-cost average strategy to deposit funds into investments by creating equal, automated, timely withdrawals from your bank account into index funds, ETFs, or stocks. 

After you’ve maxed out tax-advantaged accounts, contribute to taxable accounts.

I’ve done this for years. Now I’m using my M1 Finance account, an online broker that makes it easy to construct your ideal portfolio and fund it over time.

I invest a set amount monthly into my account. It’s an automated withdrawal, forcing me to invest before I spend my paycheck. 

Read more: Getting Started with Investing? Here’s What You Should Do

6. Invest Better

Everyone should invest in stocks. Long-term stock market investing is a proven path to wealth. 

Your specific investment strategy depends on your knowledge, willingness to learn and research, and comfort level. 

Passive index fund investing is an appropriate strategy for everyone. It involves investing in stock and bond index funds and ETFs with broad diversification as your primary investment vehicle. 

With this strategy, you’ll match the market returns, which is acceptable for most people.  

Switching to an all-index fund strategy may improve your finances.

For those looking to add individual stocks to the mix, dividend and speculative growth stocks may help achieve your objectives — though you’ll struggle to beat a diversified index strategy over the long term. 

One way to increase your chances of success is to subscribe to an investing newsletter that provides stock recommendations to supplement your research.  

I use investment newsletters to help narrow the universe of individual stocks worthy of my investment dollars. 

After a lousy 2022, growth stocks are poised to rise. Get a leg up with monthly recommendations from professionals who study stocks full-time.

I subscribe to and recommend the Motley Fool Stock Advisor (review) for speculative growth stocks. 

The newsletter pointed me to The Trade Desk (TTD) in late 2019, a stock that tumbled quite a lot last year, but I’m still up more than 150% over my cost basis. 

Growth stock investing is not for the light-hearted. But with the Nasdaq down more than 30% last year, today is better than 365 days ago.

For a limited time, you can get the first year of Motley Fool Stock Advisor for $79 for the first year. That’s the cheapest I’ve ever seen it. Free 30-day trial. Cancel anytime. Renews at $199 after one year.

Another newsletter, Motley Fool Rule Breakers (review), helps to find more multi-bag winners.

Rule Breakers remains at $99 for the first year.

I also subscribe to and recommend The Sure Dividend Newsletter, a monthly publication that ranks the ten best dividend growth stocks in each issue. 

As a five-year subscriber, I appreciate the supplemental analysis, which provides new ideas and validates existing holdings. 

Watch for an exclusive discount on the Sure Dividend Newsletter for readers in the coming months. Subscribers, monitor your email inbox. Subscribe here never to miss a new article. 

Read more: Best Stock Newsletters for Buy-and-Hold Investors

7. Front-Load Investments

Front-loading is investing a lump sum of cash now instead of dollar-cost averaging (investing smaller equal amounts) over time. 

For example, if you have $6,000 and plan to invest $500 per month for one year, front-loading is investing all $6,000 in the first month.

If you have the money, consider investing the lump sum in January.

According to many studies, lump-sum investing is mathematically superior to dollar-cost averaging, including this study by Nick Maggiulli at Of Dollars and Data. 

I use this strategy for college savings.

For many years, I invested $900 into 529s for my three kids on the 25th day of each month, totaling $10,800 per year. 

In 2022, I invested $4,000 per kid into each 529 in January rather than monthly. This way, I’m increasing the total investment to $12,000, taking advantage of more time in the market, reducing outflow from my monthly budget, and simplifying my finances. 

I realize not everyone can do this, and this year I’m waiting a bit longer since I just quit my job. 

If you can’t invest the lump sum in January, dollar-cost averaging a smaller equal amount every month is an acceptable alternative. 

8. Complete an Estate Plan

According to an unscientific poll, 41% of RBD readers with kids still need an estate plan. Another 24% waited more than five years after their first child to finish their estate plans. 

Dying and leaving a bundle of financial confusion is no way to treat your loved ones. 

Term life insurance is simple and sufficient for most people’s needs. Buy at least 10x your annual income.

Ask neighbors and friends for a local attorney to help with estate planning. Compare prices. Expect to pay at least $1000-$1500 for a baseline plan.

If your situation is uncomplicated, a will, trust, durable power of attorney, and advanced medical directive will cover your needs. 

Estate plans can be confusing, so talking to a trusted attorney can be worth the cost and put your mind at ease. 

The most significant deterrent for Mrs. RBD and I was taking the first step. We procrastinated. 

Once we got the ball rolling, it was a piece of cake. 

Life insurance and an estate plan are financial planning essentials for responsible adults. 

9. Increase Monthly Cash Flow

In personal finance, positive cash flow is what’s left over at the end of each month. To measure cash flow, you need a decent way to track income and outflow (spending). 

Software such as Mint and Empower will track it for you.

Or use a spreadsheet to track spending with pivot tables.

Once you understand where every penny goes each month, you can work to reduce the outflow of cash from your possession. 

Here are three suggestions for increasing monthly cash flow. 

a) Eliminate Recurring Expenses and Automated Withdrawals

Subscriptions, unused memberships, wine of the month clubs, etc., can be easily forgotten. Take a look at your credit card statement every month and eliminate recurring expenses that aren’t necessary. 

More and more businesses are changing to recurring revenue models.

We’re encouraged to set and forget expenses so the company is more likely to get paid. They call it convenience, but they use this model to help you forget the expense.

Our family pays for dance lessons on the first of every month. Whenever I see those charges, I question whether it’s worth it. It still is. 

But that may not be true for everything. January is a good time to reevaluate the recurring expenses you spend every month. 

Another option is to remove the automation. Though I love automating finances (see below), sometimes forcing yourself to pay a bill manually every month makes you think twice about it being worthwhile. 

I’m getting rid of our Apple TV+, ESPN+, and Hulu subscriptions this January. We’re not using them (until Ted Lasso and Severance come back on). 

b) Payoff a Debt

Consumer debts that require a monthly payment keep you from becoming wealthy. These include low-interest car loans, credit card balances, and personal loans.

Debts require regular payments, decreasing positive cash flow. Paying them off is a short-term sacrifice to enhance traction in the long term. 

Identify these debts and stop justifying them (even the 0.9% car loan). 

The goal is to keep more of your income every month, not give it to someone else. This should be obvious.

You’re not getting wealthier by servicing a 0.9% loan on a depreciating asset. 

Most importantly, think hard before taking on new consumer debt this year.

c) Refinance Your Mortgage

2023 will be a more challenging year for mortgage refinancing. Rates have increased above 6%. 

You might have missed the window if you didn’t refinance during the previous decade.

However, some may still find opportunities to save money with your home financing. 

And mortgage brokers are desperate for business, so some deals may be out there. 

If you own a home, intend to stay, and your interest rate is 7%, or above, it’s worth looking into a mortgage refinance to lower your monthly payment. 

Though most of you probably aren’t that high, some people may have a second mortgage or high rate due to an untimely purchase or previously bad credit.

I’ve refinanced various mortgages six times over the years and saved tens of thousands of dollars.

You can extend the payment term by resetting your mortgage to a 30-year loan duration and sometimes get a lower interest rate. This combination of more time and lower rates reduces the monthly payment, leaving you with more cash left over each month. 

Avoid increasing the loan duration if it means getting a higher interest rate.

Or refinance to a shorter-term loan (15-20 years) to get a lower rate and pay it off sooner (we reset to a 20-year mortgage refinance in September 2020). 

Read more: When to Refinance a Mortgage

10. Solve Problems by Smarter Means

Trailblazing early retirement internet celebrity Jacob Lund Fisker from the blog Early Retirement Extreme retired at age 33 on an annual budget of around $7,000.

In a guest post on Get Rich Slowly in 2019, he said this:

We consider spending money a failure to solve our problems by smarter means. — Jacob Lund Fisker

Adopting this mindset changes the way you think about inconveniences. Instead of rushing to Amazon to purchase something to fix a problem, why not find an alternative solution that costs less or doesn’t involve money?

Borrow from a neighbor, find a helpful YouTube video with a DIY solution, or invest some sweat equity into your problem to make it disappear. 

Think more creatively before succumbing to the urge to spend. The savings can be meaningful. 

11. Simplify to Improve Your Finances

Financial simplification is another recurring theme at the beginning of each year.

Minimizing the complexity of your financial life makes room for leisure. It reduces stress and frees brainpower for other endeavors. 

There are many ways to accomplish this:

• Close redundant accounts (bank accounts, credit cards, brokers)
• Own fewer stocks/ETFs
• Reallocate employer-sponsored contributions to fewer funds
• Pay off debts
• Sell mediocre assets 

Over the years, I’ve increased my financial complexity with new income streams (real estate crowdfunding) and reduced complexity in other areas (credit, employment).

For example, I sold my rental property in 2019. This freed up cash and uncomplicates my taxes from now on. 

Eliminating car payments for life was another simplifying commitment. 

I’ve also reduced the number of automated withdrawals from my checking account.

I went from weekly investments to monthly and front-loaded college savings in January instead of throughout the year (see #7).

Set goals to have fewer accounts, fewer tax forms, and fewer monthly transactions.

Read more: The #1 Reason to Simplify Your Finances

12. Utilize Automation and Speed Bumps

Implementing automation in your financial life has many benefits.

You won’t miss bills or required payments, and it frees your time and brainpower to do other things.

One strategy is to use automation to encourage good habits such as regular investing and paying your mortgage and essential expenditures (e.g., utilities) on time.

Set up online bill-pay or pay directly on the company websites. I use autopay for my mortgage directly on the administrator’s site.

On the other hand, you can add manual steps (speed bumps) to rethink less desirable habits such as discretionary spending. Manually walk through your credit card bill to see where you’ve spent the money so you see it before scheduling the payment. 

If you’re a spreadsheet junkie like me, export .csv files from your bank or broker and import them into a spreadsheet template ready for calculations and charts.

I use spreadsheet automation to format data extracts from my brokers to create the charts you see on my Portfolio page. Excel can do incredible things if you set your spreadsheets up with automation. 

So instead of manually typing numbers, the data comes in clean, and you save time. 

Conclusion

Most New Year’s resolutions are broken within 30 days.

Instead, think about your long-term financial objectives and take daily steps in that direction. 

Start small and build each day. 

Some days you’ll choose poorly, but you can get back on track the next morning. 

In what ways do you plan to improve your finances in 2023?

Note: Bold links indicate links from RBD affiliate partners. 
Featured photo by Lindsay Henwood via Unsplash

Craig Stephens

Craig is a former IT professional who left his 19-year career to be a full-time finance writer. A DIY investor since 1995, he started Retire Before Dad in 2013 as a creative outlet to share his investment portfolios. Craig studied Finance at Michigan State University and lives in Northern Virginia with his wife and three children. Read more.