Between inflation, rocky equity markets, and a crypto rollercoaster, 2022 was a weird year.
Despite a strong job market, uncertainty abounded—and many people have been left worrying about layoffs, a possible recession, or how they're going to afford their next trip to the grocery store. After 2021's epic gains, it's felt like whiplash.
If you're in recovery mode, financial advisors say the best thing to do in 2023 is to forget about the next best thing—go back to the basics.
“The new year is almost certain to bring economic twists and turns. My advice—while it may sound boring to some—is to keep your finances simple," Carrie Schwab-Pomerantz, president and board chair of the Charles Schwab Foundation, tells Fortune. "Stick with time-tested fundamentals like budgeting and saving, investing for the long term, and diversifying your portfolio."
Schwab-Pomerantz believes tried and true money management principles will win out in 2023, as people focus on building wealth and a financial security blanket against future volatility. The best thing you can do is focus on the fundamentals, especially if recession fears are getting to you. Nothing helps you get through a job loss or reduction in hours like a sizable emergency fund.
If keeping it simple sounds like an appealing New Year's resolution, here's what to focus on.
Conduct a financial audit
After a turbulent year, you'll want to know where you stand. Start 2023 on the right foot by conducting a financial audit to see where your money is going. This means examining your bank account and credit card statements and categorizing and evaluating your spending.
"Most things are going to cost more next year," says Brad Hindman, financial advisor with Wells Fargo Advisors. "And items that are financed with variable rates will result in consumers paying more for the same item in the long run."
You might be surprised by your own spending, says Hindman, noting one of his clients was able to eliminate subscriptions and other expenses that were being automatically debited from his account, while another was able to reduce her entertainment budget.
It's helpful to write down what you are spending, or use an app like You Need a Budget or Copilot to categorize everything. It is likely you will find some kind of spending that isn't serving you, whether that's impulse purchases after a stressful day or food from the fancy grocery store.
Additionally, pull how much you have in retirement accounts and how much debt you have. Determine your net worth. All of this information is good to have, and can inform the financial decisions you make going forward.
Focus on what you need
One important place to start with your money management is to know the difference between a true need and a want, says Julie Beckham, assistant vice president of Financial Education, Development & Strategy Officer at Rockland Trust. Do you really need to spend money on the Amazon knickknack you saw while scrolling on TikTok, or would your life be fine without it?
"In our consumer-based culture, it is easy to forget the difference between what are needs and what are wants, because the wants are everywhere," says Beckham.
But asking yourself before every purchase whether the purchase is essential or not "might be the thing that keeps you from spending beyond your means," she says.
If you're having trouble over-spending, one tried-and-true method for cutting back is to impose a 48-hour (or longer) waiting period before you buy something. This removes the immediate temptation, and gives you time to rethink if you really "need" what you're about to buy.
Asking if something is a need or a want can also be helpful during your financial audit.
Make it a habit
One of the most well-known (and well-regarded) strategies for long-term investing is called "dollar-cost averaging." Dollar-cost averaging simply means that you are investing a fixed amount of money in the same fund at regular intervals over a long period of time.
If you contribute to a retirement account out of each of your paychecks, you're already dollar-cost averaging. It means you're not timing the market, which is where most investors run into trouble, but instead consistently investing at the market's yearly highs and lows.
It's a good strategy for saving in an emergency fund, too—while many people find it easier to save large, one-time sums like a tax refund or year-end bonus, saving a little bit each month automatically also adds up over time.
Know the terms
When was the last time you checked the APR on your credit card, or how much interest your savings account is paying you? Now is the time to take stock of the basics of your various financial accounts.
"Many people do not understand the terms of their credit cards, bank accounts, loans, or cash advances," says Tatiana Tsoir, a certified public accountant and author. "Know what you are getting yourself into and whether it is going to help or hurt your financial situation."
Take this stat for instance: 21% of people say they don’t pay fees to invest in non-retirement accounts, according to a survey from the Financial Industry Regulatory Authority Investor Education Foundation. That's likely not true—financial companies don't provide services out of the kindness of their hearts. If you're not sure what you're paying, look for the "expense ratio" on the funds you're investing in, or ask your financial advisor how they make money. What you learn may surprise you.