6 Money Habits to Break in 2023

Get off to a good start by stopping some common (bad) practices

hammer smashing a brick that looks like a credit card

Doug Chayka

Karen Hube,

AARP

En español

Published December 12, 2022

You may not be able to do anything about big problems afflicting the economy and the stock market, but little changes to your everyday activities can help shore up your financial security. Consider the following six routines — and why you should ditch them in 2023.

1. Constantly checking your portfolio’s value

During rocky times in the market, it’s natural to want to know how your investments are holding up. But the more often you check, the wider you open the door to counterproductive emotions. Exuberance can fuel overconfidence and unwise risk-taking, while fear of loss can drive you to yank money out of stocks and miss out on future returns, says Chris Orestis, president of Retirement Genius, a financial planning website. Either way, you impair your portfolio’s long-term growth potential.

How to break the habit

Keep in mind that short-term ups and downs are a package deal when you invest in stocks, but over time the stock market has recovered from declines and resumed climbing. In the past 42 years through 2021, the S&P 500 had intra-year declines in every year averaging negative 14 percent, with dips of 10 percent or more in 23 years, according to Fidelity. But the index ended in positive territory in 35 years, and the average annual return has been around 14 percent.

2. Downplaying the risk of cybercrime

You might think cybertheft will never happen to you, but the older you are, the more likely you are to be a target. Cybercriminals stole nearly $3 billion from people 50 and older in 2021 — more than all younger age groups combined — according to the FBI. The most common tactic is to entice people into providing personal data by phone or email, or into clicking on seemingly innocent links that let criminals access information on a target’s computer. Paul Tracey, CEO of Innovative Technologies, a cybersecurity company, says scammers have been getting increasingly sophisticated. They commonly pose as employees of familiar companies and drop personal details about you that make them seem legitimate, such as your birthday or where you live (often easily found in an online search).

How to break the habit

“Anytime you get a request for an account number or personal information, or anytime you are invited to click on a link, you should be skeptical,” says Tracey. Use different complex passwords for each of your sensitive accounts and change them quarterly. That way, if a password for one account is revealed in a security breach, hackers can’t use it to access your other accounts.

3. Making minimum payments on your credit card

A fast way to eat up cash is to keep a large balance on your credit card. One major reason why: The average annualized interest rate on credit card debt was 18.9 percent in early October, reports Bankrate. Let’s say an issuer makes carrying a balance easy by setting a minimum payment of just 1 percent of the balance or $25, whichever is larger; if you rack up $1,000 in charges in a month and then pay only the minimum, you’d need more than nine years and pay nearly $2,000 to close out the balance. Credit card debt surged 13 percent in the second quarter of 2022 compared to a year earlier — the largest annual hike in at least two decades, according to the Federal Reserve Bank of New York.

How to break the habit

Get tactical to erase your high-interest debt. “Transfer your balance to a zero-interest card,” says Ted Rossman, a senior industry analyst at Bankrate. This autumn, he notes, Wells Fargo Reflect Visa and Citi Diamond Preferred Mastercard were offering zero interest for 18 and 21 months, respectively. If you don’t qualify for zero interest, you can call your credit card company and ask for a lower interest rate. Some credit card companies will work with you. Alternatively, debt counseling nonprofits that are members of the Financial Counseling Association of America or the National Foundation for Credit Counseling can help set up a debt management plan for you. “Paying off a card with an 18 percent interest rate is like getting a guaranteed risk-free, tax-free return,” Rossman says. “You’re not going to get that on your investments.”

4. Procrastinating on your taxes

Racing to prepare your tax return to meet the April 15 filing deadline can cause errors and even trigger IRS scrutiny and delay a refund, potentially by months.

The IRS is working its way through millions of unprocessed tax returns, a backlog that was caused in part by tax law changes during the 2021 filing season. Error-free tax returns filed electronically and on time are often processed more quickly than paper returns, says Janet Holtzblatt, a senior fellow at the Urban Institute and Brookings Institution Tax Policy Center. But returns with math errors — there was an upsurge of them in 2021 — are often set aside to await review.

How to break the habit

Get started as early as February 1. By then, you should have received the tax documents you need, such as a Form W-2 from your employer or a Form 1098 from your mortgage lender. This will give you time to avoid errors and learn how to file electronically, if you’ve never done so before. If you file electronically and opt for direct deposit, any refund should land in your bank account within several weeks. For help with tax preparation or filing electronically, turn to the free AARP Foundation Tax-Aide service at aarp.org/taxaide.

5. Putting expenses on autopilot

When was the last time you shopped for cheaper auto or home insurance? Or canceled subscriptions and memberships you don’t use? Or simply combed through your monthly expenses to identify charges you can eliminate? You could be needlessly spending hundreds or even thousands of dollars every year, says Jason Noble, a financial adviser at Prime Capital Investment Advisors in Charleston, South Carolina.

How to break the habit

Noble recommends you call your insurers every year or two for a full diagnosis of your policies. You can save on some auto policies by designating your car for non-commuter use, signing up for auto-pay, going paperless or dropping your policy’s roadside assistance if you’re a member of AAA.

On a quarterly basis, advises Noble, sit down with your bank and credit card statements, putting an E next to all of your essential expenses and a D next to the discretionary ones. “Review those with a D for discretionary,” he says. “Can you eliminate those or whittle them down?”

6. Postponing joy

After working and saving diligently for decades, many people find it hard to turn off the scrimp-and-save mentality, says Freddie Rappina, founder of Opta Financial, a Fairfax, Virginia, advisory firm. “I ask them, ‘What are you waiting for?’ ”

How to break the habit

Review your bucket list and choose a few realistic goals. An island getaway? An Alaska cruise? As long as your income needs are covered and you have an emergency fund, aim to build your dreams into your short-term financial plan, Rappina says. “This is your time to live the life you want.”

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