2023 was off to a rocky start but eked out a positive first week. Friday’s gains were fueled by economic data showing that the labor market remains steady, but wage growth is slowing, inflation is slowing, and the non-manufacturing Purchasing Managers’ Index showed the services industry contracted in December. These are signs that the Fed’s interest rate hikes are working to slow the economy. While a recession may still be looming, the job market looks strong.
January is always a time for resolutions, and sometimes for stopping things we may have been over-indulging in, like Dry January. This is also a great time for a financial fast after the excesses of the holidays.
A financial fast is when you stop spending on anything except absolute necessities. Groceries are okay, but no eating out. Even then, plan out your meals and stick to your grocery list; don’t splurge on non-necessary items like soda, chips, or candy. Pay your bills, but no shopping for anything. Unless your job requires it, put off haircuts, color, spa visits, and nail salons. No online shopping. No going out, unless it’s free.
Dates or family adventures can be to parks or free museums, like the Smithsonian. Watching movies or playing board games at home are also free alternatives.
Ideally, you fast for a full month, paying your bills and buying only what is absolutely necessary: gas, food, and things required for work or school. If you can’t make a full month, try for two weeks.
Just like fasting from food helps to reset your metabolism, a financial fast can help reset the bad habits we all get into: grabbing food from the drive-thru because it’s convenient; ordering out because we’re exhausted and didn’t meal-prep over the weekend; buying online because it’s easy and there, but not because we really need the item. The fast helps you become more conscious of your spending. Things that are commonplace are no longer special. Limiting spending makes you enjoy what you do purchase even more.
Your action item this week is to increase your savings. If you received a raise this year, use part of it to save. The first area is your emergency savings. If you have solid emergency savings, increase the amount you are contributing to your retirement accounts or other investments.
Our events for the year are being posted, and our High School Financial Literacy class starts this Saturday. Be sure to follow us on Facebook and check out our website at covingtonalsina.com.
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.
Stocks stage first big rally of 2023 CNBC by Carmen Reinicke & Sarah Min 010623