New year. New you. New finance goals. 2022 is behind us, and if you’re looking for some inspiring finance-related content to start your 2023 with a bang, you’ve come to the right place.
With the economic doomsayers warning of a looming recession, and the news filled with prophecies of ever-growing inflation and rising costs, today I want to relax your mind by taking you back to some LOAM basics.
The truth is, putting yourself in a better financial position doesn’t have to be difficult. People like to make money seem complex, because they think it makes them look smart. But that’s not what we’re about at Lawyer On The Mission. We like to keep things simple. So that’s why we’ve laid out our top 5 New Year’s resolutions that you can adopt to boost your finances in 2023.
Carry on reading to make 2023 your most successful financial year yet.
1. Save More Money
Does this sound so obvious it hurts? Yes. Does it still bear repeating? Absolutely.
Sometimes, especially just after Christmas, we can become so overwhelmed and absorbed in the consumer society in which we live that we abandon our principles and splurge on stuff we don’t really need. It happens to the best of us, and its important not to beat yourself up about it. You had some fun, but Christmas is over now, and its time to get back to reality. Stand up, dust yourself off, and put your sensible hat back on.
Remember, there are two principal ways to save more money. You either (a) cut your costs, or (b) earn more money that you can stash away. Ideally, you do a combination of both. Now it’s not always easy to earn more money, especially with the market being so unpredictable at the moment. But the one thing you can always do is look at ways to cut down your spending.
We’ve talked about cutting spending and saving money endlessly on this site, but that’s because for the vast majority of people it is the quickest and easiest way of beginning your journey towards financial freedom.
As a general rule of thumb, you should try to build up an emergency savings stash of around 6 months’ earnings before you start thinking about any lavish purchases or investments. As human beings, a lot of us have an under-appreciation of how quickly our finances can turn sour (if you don’t believe me, try wrapping your head around this statistic from the FCA that 1 in 4 people in the UK are in financial difficulty or will be in financial difficulty if they suffer a sudden financial shock. That’s a lot of people).
So make sure that if things turn south, you’ve got a buffer of funds to back you up. Start saving that dough.
2. Pay Off Your Debts
Debts are like leeches that stick to your leg. They won’t let go until they’ve had their fill, and its up to you to get them removed before they do some serious damage.
As of October 2022, the Money Charity reported that the average adult in the UK has £3,895 pounds of unsecured debt (i.e. excluding things like mortgages or most business loans).
Debt comes in all shapes and sizes, so its important to target the ones doing the most harm first. With that in mind, the way we would personally tackle debts in 2023 is by doing the following:
- Make a list of all your debts.
- Pay off any debts that could constitute a threat to your health or wellbeing. For example, your water, electricity, heating or any debt that could find you staring at a judge in court.
- Target the debts that cost you the most money. These will often be the ones with the highest interest rate, but not always, particularly if they are a very small sum. To be sure, work out how much each debt is costing you in interest per month and aim to pay off the most expensive.
- If possible, move any existing debt on to a 0% interest loan or credit card. This will generally only be possible if you have a decent credit rating. To find out more, read our post about improving your credit score.
- Reach out for free financial help and support from bodies such as StepChange and Citizens Advice.
Remember, every individual will have different circumstances and this is just what we would do. Always make sure to seek you own professional advice to suit your situation.
3. Grow Your Pension
In 1984, Alphaville asked an existential question in their hit single ‘Forever Young’. The question, “Do you really want to live forever?” can be answered quite simply: yes, provided you have a sustainable long-term pension plan.
Assuming you eat your greens and do your squats, we will work on the basis that you intend to live until you are old and grey. And living until you’re old and grey requires you to have a pension that will fuel you through your twilight years.
To crudely adopt an old adage which relates to investing, when it comes to pensions, the best time to start one was yesterday, and the second best time is today.1I’ve actually never understood this saying. Surely a better time to start would have been last week, or last month, or last decade? Anyway, let’s not let logic get in the way of a good saying. The key thing to understand is that most pensions nowadays work by investing your money, and the single best thing you can do to maximise your investments (assuming they are well-diversified) is to give them time.
That means the sooner you open one, the better. And if you already have one, consider whether you are contributing enough towards it each month. Remember, most pension contributions can be paid free of tax, meaning you can make your money work much harder for your future self if you pay in more now.
If you’re interested in opening up your own private pension because you are self-employed or your workplace doesn’t have one (which is usually illegal, by the way), you can read our ultimate guide to private pensions.
4. Start Investing
In our humble opinion, there is only one thing better than having money. And that’s making even more of it.2See also: family, health, prosperity, inner peace etc. The surest way that we have found to grow your money and make it work for you is by investing it.
As regular visitors to this site will attest, we don’t promote any old slapdash selection of stocks to invest in. Oh no. We encourage well-researched and simple investing, predominantly in well-diversified and well-respected index funds. You can learn what an index fund is as well as the maths behind their magic by reading our other posts, but in summary, we believe that index funds are the single most powerful wealth building tool available to retail investors today.
Much like our previous guidance on pensions, the key to successful investing in index funds is time. And that means that the sooner you plant your investing seeds, the bigger and juicer your financial fruits will be. So if you haven’t started thinking about investing yet, then 2023 may just be the year to start.
5. Review Your Financial Goals
As the old saying goes, you can’t score without a goal. All of our personal finance objectives will be different, and a small achievement for one person may be another person’s dream ambition.
Our circumstances can change over time, and its important to review and re-evaluate your targets to ensure you are keeping track of your progress and aiming in the right direction.
As part of this exercise, it may be helpful to take a look back over 2022 and give yourself an honest self-assessment on how well you managed your finances last year. Take into account any unexpected financial situations and don’t be too harsh on yourself. Achieving financial independence requires you to be rational and objective, so try to take the emotion out of it, even if its difficult.
Identify your mistakes, create ways to prevent them happening again, and keep pushing forward. At LOAM, we believe that with a positive mental attitude, anything is possible, even great wealth and financial freedom. And we’ll be here to help you every step of the way, whatever your goals are for 2023.
Summary: Looking Forward To The Year Ahead
This year is a new year for your financial dreams and ambitions. Its a fresh beginning and developing your financial skills by even just a little bit could significantly improve your life. And that’s precisely what this site is here to do.
Last year was a busy year for Lawyer On The Mission. We started our own site and published a few posts which some of you loved. This year we want to meet even more of you and help guide you on your own path to financial independence.
If you’re new here, make sure to sign up to our mailing list and leave a comment saying hello. We read every single comment and love interacting with you.
We wish you the very best for 2023.