5 Ways to Save More Money in 2023

2022 was undoubtedly a rough year for many people financially. Between record-breaking inflation, rising interest rates, and a plunging stock market, there were a lot of forces working against most American households.

Yet, that doesn’t mean that we can’t loop optimistically to the new year and start off on the right foot. With that said, here are five great tips for making 2023 your year to save more money and build your wealth.

1) Plan Your Purchases

If you’re not doing so already, make this the year that you start budgeting. Budgeting your money doesn’t have to be something that’s restrictive. Instead, think of it as an opportunity to plan out how you’ll spend your hard-earned money.

What’s helpful about budgeting is that it provides a mechanism for revealing areas of your finances where adjustments can be made. This will allow you to trim the fat by eliminating those purchases that don’t bring you any joy or value and reallocating your money toward those that do. This could help you to better savings goals such as focusing on your emergency fund, dollar cost averaging your investments, and saving more money for retirement.

To get the most out of your budget, it will be best to work with your spending habits as they are. An easy way to become familiar with your transactions is to have them collected into one convenient report. A budgeting app like Buxfer can conveniently do this by connecting with all of your bank and credit cards and downloading the information into the app. 

Click here to learn more about how Buxfer can help your 2023 budget.

2) Increase Your 401(k) Contributions

Sometimes where you save your money can be just as helpful as how much you save. If your employer offers a 401(k) retirement plan, then using it can have several great benefits over using it over a regular taxable savings account. 

  • Decrease taxable income. Every dollar that you contribute to your 401(k) is one less dollar that will be counted as taxable income at the end of the year when you file your tax return. This means that not only are you saving a dollar for yourself, but you also don’t have to pay the IRS.
  • Takes advantage of compound growth. Because your savings are invested for long-term future growth, they will have the opportunity to multiply thanks to the incredible force of compound growth. Furthermore, because it’s a 401(k), the savings will grow tax-deferred until they’re needed someday for retirement.
  • More employer matching contributions. Are you getting your full employer match on your 401(k) contributions? If not, then, you definitely need to increase your contributions. Not taking full advantage of employer-matching contributions is like leaving free money on the table.

As of 2023, the IRS has increased 401(k) contributions to $22,500 per person (or $30,000 if you’re age 50 and over). Additionally, IRA contributions have also been increased to $6,500 per person. If you used both retirement plans and saved to the maximum limit, that would enable you to avoid thousands of dollars in taxes.

3) Automate Your Savings

If you’d like to have some money set aside for a rainy day or any other reason but you’ve struggled to save up, then perhaps what you need to do is automate your savings. A simple action like having a few hundred dollars automatically withdrawn from your checking account and placed into a separate savings account can be a very effective way to reach your goal. 

The reason this works is that it plays into the “out of sight, out of mind” logic. When you try to save all of your money in one account, you’ll be too tempted to spend it because you’ll be regularly exposed to it. However, when it’s in a separate bank account that you don’t check as often, it won’t be as fresh in your mind. Even though that seems insignificant, you’ll be far less likely to spend it. 

4) Earn a Decent Rate on Your Cash

When the U.S. Federal Reserve raised interest rates at an unprecedented pace throughout 2022, it was because they wanted to slow down business and tame inflation. While this made borrowing money much more expensive for the general public in the form of higher interest rates on mortgages and other loans, it did have a positive side effect on savings accounts paying a decent interest rate again.

If you’ve got plans to set aside some money such as an emergency fund, why not let that cash earn a decent rate of return while it’s sitting idle? Nearly every reputable online high-yield savings account is currently paying above 3% APY, most with no minimum balances or fees. That means for every $10,000 you set aside you could be earning an extra $300 just for parking your money in one of these accounts.

5) Own More Dividend Paying Assets

Another great way to earn a decent rate of return on your savings is to invest it in assets that will pay you dividends simply for being a shareholder. Dividend-paying companies are some of the most financially reliable stocks that you can buy. This is because they must be profitable in order to continue paying dividends. 

Although any stock runs the risk of losing value, a portfolio of reputable dividend-paying companies will have a much stronger chance of weathering a possible recession than one made up of growth stocks. The reason why is that at a minimum you’ll still receive dividend payments regardless of how the market fluctuates.

If you’d like to gain a slightly higher rate of return and don’t mind taking on some additional risk, then you may also want to check out REITs. REIT stands for “real estate investment trust” and it’s a way for the average person to benefit from property ownership without actually owning or managing it physically. It’s fairly easy to find REITs paying 4 to 6 percent whereas the average dividend-paying stock might pay only 2 to 3 percent.

Either way, with the markets down, buying stocks and REITs now could benefit you in the long run. If the Fed ever reverses interest rates and the markets begin to rally, then you’d be well-positioned to capitalize on the opportunity since most assets are trading at a discount right now.

Featured image credit: Pexels

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