7 Ways To Save Money In 2023 (You Will Need To Act Very Fast For #7)

Summary:

It’s been a tough year for American households, with high inflation, a bear market, fears of a recession, and a crypto crash. Many financial analysts believe the economy will continue to worsen in 2023. To prepare your finances for further economic uncertainty, consider making the following seven money moves before the end of the year.

The financial health of most American households has seen better days.

  • Millions of families are facing hardship because of inflation.
  • The S&P 500 is set for its first annual decline since 2018 and its worst year since 2008.
  • Mortgage rates for a 30-year fixed-rate loan are now hovering above 7%, which is more than 4 percentage points higher than a year ago.

Despite some recent encouraging news (i.e., inflation is slowing down a little, lower gas prices, and low unemployment), many financial analysts believe the economy will continue to worsen in 2023.

The good news is there are simple ways you can prepare yourself for a rocky 2023. Let’s go back to basics and look at seven small but impactful ways you can save money and prepare your finances for further economic uncertainty.

Seven ways to protect your finances in 2023

When it comes to your finances, modest tweaks are better than trying for ambitious life changes. That’s because bite-size changes are more likely to grow into new habits that actually stick. Here are six modest but important steps you can take today to improve your finances today.

  1. Earn more on your savings. Keep your cash in an account with higher interest rates and lower fees. Some online-only accounts offer rates of around 4% and can be linked to your existing account for easy transfers. Consider using SuperMoney’s savings accounts comparison tools, which monitor which banks offer the highest interest rates so you can reallocate your cash accordingly.
  2. Switch your bank accounts. Review your current accounts and shop around to make sure you’re getting the best deal. Look for accounts with higher interest rates, lower fees, and better customer service.
  3. Refinance high-interest debt. When done right, refinancing your debts with a lower interest rate can save you money and help you get out of debt faster.
  4. Cancel unused memberships. If you’re paying for memberships or subscriptions that you’re not using, consider canceling them. This can help free up extra cash that you can put towards saving or investing.
  5. Negotiate a better deal with service providers. If you’re keeping memberships that you use frequently, consider negotiating the charges to get a better deal. This could involve calling customer service and negotiating a lower rate or switching to a different package that better fits your needs.
  6. Review 401(k) contributions and allocations. Make sure you’re contributing enough to your 401(k) and that your investments match your risk tolerance.
  7. Maximize this year’s financial benefits before they expire. Some important financial benefits will no longer be available on New Year’s Eve.

Let’s dig a little deeper into those tips to see how much you save and earn if you act today.

Earn more interest on your savings

Here’s an example of how much you can earn by shopping for a higher-yielding savings account. Let’s say you have $10,000 in savings and are currently earning 0.268% APY in a traditional savings account at a big bank. This would earn you a total of $26.80 in interest over the course of a year. Barely enough to buy a pizza for the family, which hardly seems a fair return on a $10K investment.

Now, let’s say you switch to an online-only savings account that offers a 4% APY. This would earn you a total of $400 in interest over the course of a year, which is more than 14 times the amount you would earn in the traditional savings account.

While this is just one example, it illustrates the potential for earning significantly more on your savings by shopping around for a higher-yielding account. It’s important to compare rates and fees when choosing a savings account, as some accounts may offer higher APYs but also have higher fees or minimum balance requirements.

Switch bank accounts

When it comes to banking, it doesn’t pay to be loyal. Switching checking accounts and taking advantage of signup bonuses is a simple way to earn extra cash. Here’s an example of how much money you can make.

Let’s say you open a new checking account with a bank that offers a signup bonus of $200 for setting up a direct deposit and making a certain number of debit card transactions within the first few months of opening the account. You switch your payroll direct deposit to the new account and use your debit card for everyday purchases.

After a few months, you meet the requirements for the signup bonus, and the bank deposits $200 into your account. This is money that you wouldn’t have earned if you had stuck with your old checking account. Now, let’s say you repeat this process with a different bank that offers a $300 signup bonus for similar requirements. By switching to this new account and meeting the requirements, you earn an additional $300.

In total, you’ve earned $500 in signup bonuses just by switching checking accounts and taking advantage of generous offers. That is more money than you would make by having $10K in a 4% APY savings account.

While it’s important to compare fees, interest rates, and other features when choosing a checking account, taking advantage of signup bonuses can be a simple way to earn extra cash. Just make sure to read the fine print and understand the requirements for earning the bonuses before opening a new account.

Refinance high-interest debt

You don’t have to stick with a high interest rate loan. If your credit score has improved, rates are lower now, or your income has improved, you can save money by consolidating your debts with a lower-interest loan. Here are some examples of how it could work.

Transfer credit card debt to a 0% balance transfer card

If you have excellent credit and small debts you can repay quickly, get a balance transfer card with an introductory 0% APR. You will probably have to pay a 3% to 5% balance transfer fee, but you could save big if you pay off the debt before the introductory period (up to 21 months in some cases) ends. For example, if you have $12,500 in credit card debt with a 22.29% APR, you will pay $1,560 in interest if you pay it off in a year. Pay it off in the same period with a 0% APR balance transfer card, and you will only pay $375 interest, assuming the card charges a 3% balance transfer fee.

Consolidate high-interest debt with a lower-interest loan

If you don’t qualify for a balance transfer card or the debt is too large to pay off within the introductory period, you can still lower your interest payments with a debt consolidation loan. For example, you would save $513 if you consolidated the $12,500 in the previous scenario (22.29% APR to be paid off in 12 months) and qualified for a 12-month debt consolidation loan with a 15% APR.

The benefits of consolidating your debt go further than lower interest rates. Many households find that locking themselves into a fixed monthly payment instead of a flexible credit card payment helps them budget better and get out of debt faster.

Request a lower credit card interest rate

If you have credit card debt with a high interest rate and neither balance transfer cards nor debt consolidation loans make sense in your case, consider negotiating a lower rate with your creditor. It doesn’t always work, but you may be surprised by what you can save by just calling your credit card issuer and saying something like this. “I have been your loyal customer for X years, and I am receiving multiple credit card offers from other companies advertising much lower rates than the rate I am paying with your card. I would like to request a lower rate on the card I have with you because I would really prefer to stay with your company rather than accept a lower rate from one of your competitors. What can you do to help?”

Cancel unused memberships

Canceling unused memberships can be a simple way to save money and free up extra cash for saving or investing. Here are a few examples of how much you can save by canceling unused memberships.

  • Gym membership. Let’s say you signed up for a gym membership a few years ago with the intention of going regularly, but you’ve only gone a handful of times since. If your monthly membership fee is $50 and you cancel it, you’ll save $600 per year. That’s money you can use to boost your savings or invest in other financial goals.
  • Streaming service. If you’re paying for a streaming service you don’t use very often, consider canceling it. For example, let’s say you’re paying $15 per month for a streaming service that you only use a few times per month. If you cancel it, you’ll save $180 per year.
  • Magazine subscriptions. If you’re paying for magazine subscriptions you don’t have time to read, consider canceling them. Let’s say you’re paying $30 per year for three different subscriptions you never get around to reading. If you cancel them, you’ll save $90 per year.

There you have it. You could save $870 by canceling a handful of memberships and subscriptions. This is extra cash that you can use to boost your savings or invest in other financial goals.

Negotiate a better deal with service providers

Negotiating a better deal with service providers and creditors is a simple way to save money on your monthly bills. Here are a few examples of how much you can save by dusting off your negotiating skills.

  • Cable and internet. If you’re paying a high price for cable and internet service, consider negotiating a better deal with your provider. For example, let’s say you’re paying $200 per month for a package that includes basic cable and internet. If you call your provider and negotiate a lower rate, you might be able to save $30 per month or $360 per year.
  • Car and home insurance. You can lower your auto insurance premium by increasing your deductible or lowering coverage you already get through another insurance policy. It’s also worth just calling your insurance carrier and letting them know you are shopping for a better deal and would like to know their best offer.
  • Cell phone plan. If you’re paying a high price for your cell phone plan, consider negotiating a better deal with your provider. For example, let’s say you’re paying $100 per month for a plan that includes unlimited data and texting, but you rarely use all of your data. If you call your provider and negotiate a lower rate for a plan with less data, you might be able to save $20 per month or $240 per year.

By negotiating a better deal with service providers and creditors, you can save a lot of money on your monthly bills, get out of debt faster, and free up extra cash for saving or investing.

 

Review your 401(k) contributions and allocations

Reviewing your 401(k) contributions and asset allocations is important for a number of reasons. Here are a few examples of how reviewing these factors can make a difference in your retirement savings.

  • Ensure you are saving enough. By reviewing your 401(k) contributions, you can ensure that you are saving enough money to meet your retirement goals. If you are not saving enough, you may need to increase your contributions or consider other options for saving for retirement, such as a traditional or Roth IRA.
  • Maximize employer matching contributions. Many employers offer matching contributions to 401(k) plans as a way to encourage employees to save for retirement. By reviewing your contributions, you can ensure that you are saving enough to take advantage of your employer’s matching contribution, which can significantly boost your retirement savings.
  • Rebalance your asset allocation. Asset allocation refers to the mix of different types of investments in your 401(k), such as stocks, bonds, and cash. By reviewing your asset allocation, you can ensure that it is appropriate for your risk tolerance and financial goals. If your asset allocation becomes too heavily weighted in one type of investment, it may be necessary to rebalance your portfolio to reduce risk and increase potential returns.
  • Monitor fees. Another important reason to review your 401(k) is to monitor the fees that you are paying. High fees can significantly impact your returns over time, so it’s important to ensure that you are paying reasonable fees for the investment options in your 401(k).

Overall, reviewing your 401(k) contributions and asset allocations is important for maximizing your retirement savings and achieving your financial goals. It’s a good idea to review your 401(k) at least once a year or more frequently if you experience any major changes in your financial situation.

Maximize this year’s financial benefits before they expire

When it comes to many financial benefits it’s a case of “use it or lose it.” Not taking action soon enough can be an expensive mistake if you miss an important deadline. Here are some examples of financial benefits that are set to expire very soon.

  • Health FSAs. Special Covid rules allowed employees to roll over their FSA balances for a full year, so many people may have much bigger balances than usual. That temporary rule is set to expire on December 31st, so may only have a couple of days to use or lose your health Flexible Savings Account cash.
  • Tax harvesting. Tax harvesting is the practice of selling investments that have declined in value in order to realize a tax loss that can offset capital gains and reduce your overall tax bill. This can be especially important if you have realized significant capital gains during the year. By tax harvesting, you can potentially lower your tax bill and save money on taxes. Compare investment advisors that make it easy to benefit from tax harvesting.
  • Annual gift exclusion. Every year you are allowed to give away a certain amount of cash ($16K in 2022 and $17K in 2023) without it counting toward your lifetime exemption (which is currently $12.9 million). Granted, this is only a concern for high-net-worth individuals, but maximizing your annual gift tax allowance is a great way to pass on generational wealth in a tax-efficient manner.
  • 529 Plans. A special rule allows you to contribute five years’ worth of annual exclusion gifts at once to a 529 college savings plan. In 2022, that means you can contribute up to $80K ($16K x 5) without having to worry about gift taxes.
  • Required minimum distributions. If you are 72 or older and own a retirement account, you generally need to take an annual required minimum distribution (RMD) each year before December 31. Fail to do that, and you face tax penalties of up to 50% of the outstanding RMD.

Key takeaways

  • Earn more on your savings by keeping your cash in an account with higher interest rates and lower fees.
  • Switch to a bank account with higher interest rates, lower fees, and better customer service.
  • Cancel unused memberships to free up extra cash for saving or investing.
  • Negotiate a better deal with creditors and service providers by calling customer service and negotiating a lower rate or switching to a different package.
  • Review your 401(k) contributions and allocations to ensure you are saving enough, and your investments match your risk tolerance.
  • Maximize financial benefits before they expire, such as taking advantage of signup bonuses and tax breaks.
  • Use comparison tools to shop around for the best deals on loans, credit cards, and insurance.
  • Build an emergency fund to protect against unexpected expenses.
  • Monitor your credit score and work to improve it by paying bills on time and reducing your debt.