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Economy on the edge

Experts’ best advice for weathering inflation, job uncertainty and a possible recession in 2023

After a year of headline-making inflation and concerns about a potential recession, improving personal finances is at the top of many New Year’s resolution lists.

Stabilizing or improving your financial standing isn’t something that can be done overnight, experts caution, but setting clear goals and taking steps over time to meet them can leave you in a better place and capable of weathering potential economic downturns.

Here are some tips and strategies for getting your personal finances in order and setting yourself up for financial success in the new year:

Think about what you want to save for

Everyone has different goals in life, including financial goals, so there is no one-size-fits-all financial plan. Individualizing your savings plan based on your goals can help you achieve them without putting too much stress on yourself.

TIAA suggests breaking down your saving goals into three categories:

  • Goals you want to reach in less than a year, such as a summer trip or concert tickets;

  • Goals you want to reach in less than a decade, such as a home renovation or a new car;

  • “Lifetime” goals, such as retirement.

Once you’ve set specific goals and deadlines for when you want to reach them, you can take the amount you’ll need to save and divide by the number of months remaining to see how much you should save monthly.

Remember the ‘50/30/20 rule’

Setting a budget is a smart way to manage your money, and being strategic in doing so can help set you up for both short-term stability and long-term success.

TIAA recommends following “the 50/30/20 rule of thumb.” The rule says you should put a maximum of 50% of your income into “necessities” — such as rent, food and utilities — and no more than 30% into “discretionary” costs — such as streaming service subscriptions or a gym membership.

That leaves at least 20% of your income to put toward savings.

Don’t neglect your emergency fund

Savings goals and a budget are solid ways to keep your personal finances in good shape, but experts note you can’t forget to save for the unexpected.

Putting part of your savings into an “emergency fund” to cover sudden expenses such as medical bills or home repairs means you won’t have to max out a credit card or dip into your other savings when an emergency does arise.

Intuit recommends aiming to have “anywhere between six months and a year’s worth of savings” in your emergency fund. TIAA advises setting a goal of having enough in emergency savings to “cover 3-9 months of your living expenses.”

Take advantage of job benefits such as 401(k) matching

Your salary, paid time off and health insurance are likely the first things that come to mind when you think of job benefits. But many companies offer even more, and not taking advantage of what’s offered can leave money on the table.

Even if saving for retirement isn’t high on your priority list, for example, opting into a 401(k) program by just making the minimum contribution to get matching funds from your employer can help set you up for future success at little cost in the present. It can also have tax advantages, Investopedia notes.

Your company may also have other programs such as disability insurance or life insurance available at little to no cost to you. Having those policies in your back pocket can help dull the financial impacts of an unforeseen life event.

Be smart with your credit cards, and watch your credit score

Credit cards can be a useful financial tool, but they need to be used wisely.

You want to show that you have credit available and are capable of consistently making payments, but you don’t want your balance or balances to get too high. Intuit recommends “keeping your credit utilization ratio” below 30% to not have an adverse impact on your credit score.

The group also emphasizes the importance of monitoring your credit score and credit report. Many credit card companies allow you to check your credit score any time without impacting your score. Checking your credit report annually will also up your chances of catching fraud or mistakes that could negatively impact your credit score.

This story was initially revealed January 5, 2023, 6:00 AM.

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Mary Ramsey is a provider journalism reporter with The Charlotte Observer. A indigenous of the Carolinas, she examined journalism at the College of South Carolina and has also labored in Phoenix, Arizona and Louisville, Kentucky.