4 Financial New Year's Resolutions to Skip This Year

These financial resolutions could backfire if your goal is to increase your net worth.

The start of a new year is a prime time to think about changes you want to make to your financial life. In fact, according to research from The Ascent, many people set New Year's resolutions centered around money management. And this can be a good thing -- if you're smart about the goals you set for yourself.

Some common resolutions, however, could end up leaving you in a worse place in the long run. In fact, if you're thinking of setting any of these four goals for yourself, you may want to reconsider and make another plan.

1. Pay off your mortgage early

Paying off your mortgage early can seem like a smart idea -- especially if you listen to advice from finance experts like Dave Ramsey, who believes all debt is bad news. In reality, this could be a huge mistake -- especially if you obtained a mortgage in recent years when rates were at or near record lows.

A home mortgage tends to be a very low-interest loan, with many people paying less than 4.00%. Since the return on investment (ROI) from early debt payoff is the interest saved, and since you can reasonably expect an average annual ROI of around 10% over time with a safe investment in an S&P fund, it makes little sense to pay down your loan ahead of schedule.

Early mortgage payoff can also be a bad idea for other reasons besides the opportunity cost of wasting money you could put into better investments. If you pay down your home loan and you need to access the money, you'd either have to sell your home or take out a home equity loan or second mortgage. SInce home loan rates are higher now, you'd be spending more to borrow if you were forced to do that.

Rather than sending extra cash to this financial resolution, consider aiming to invest that money instead.

2. Cut all the unnecessary spending out of your budget

Overspending can be a problem many people want to solve. But, stripping down your budget to just the necessities is also a financial resolution you want to skip. The goal of managing your money shouldn't be to take all of the fun out of your life, but instead to use your hard-earned cash in a way that provides you with the very best value.

If you cut too much, you're much more likely to make yourself miserable and be unable to stick to your budget in the long run. Instead of giving up your lattes and your lunches, focus on increasing your income so you can spend more on these things. Or you can opt for making one big change (like lowering a car payment) that you make once and that allows you to save for months or years to come.

3. Give up credit cards for good

If you listen to some financial experts, swearing off credit cards could be a smart resolution. But, it's not actually a good idea to do that. Cards can allow you to earn rewards for spending you'd do no matter what. They can also help you build credit.

Rather than vowing to give up your cards, instead resolve to use them more responsibly by committing to never carrying a balance, so you don't have to spend money on interest.

4. Put as much money as you can into savings

Finally, you may want to avoid resolving to sock away every dollar you can into a savings account. With inflation surging, the money you have in savings is losing ground. Instead of bulking up these accounts, you'll want to put only the money you'll need in the coming years in savings -- and then deposit the rest of your spare cash into a brokerage account where you can invest it and earn a better ROI.

If you skip these four resolutions and replace them with other financial objectives instead, you should be well on your way to actually improving your financial life in 2023.