Savvy Financial Resolutions for 2022
Savvy Financial Resolutions for 2022
As we move into a new year, it is a good time for reflection. For many of us, the past year brought opportunities as well as potholes and challenges. Now is the perfect time to plan and commit to a financial strategy for 2022. Here are some financial resolutions to consider right now, so you will be in an improved position next year.
Review Household Spending | Do you find yourself overspending? The beginning of the year is a great time to start a detailed household budget. It is a valuable tool to manage your finances. When you list your income and expenses, you will know how much money you have left over for extras, OR where you need to cut spending. Remember to allow for inflation, so you will be able to absorb increases in utilities, groceries, etc.
Manage Debts | Your goal should be to clear your debts, and that is easier said than done. Don’t stop chipping away at them because the longer they are with you, the more you will be spending on interest. Investigate consolidating your credit card debt onto a single card with a lower interest rate than you are currently paying. Look at your mortgage too. Should you refinance with a different loan provider that offers a more competitive rate?
A reminder: If you have a student loan, the current federal student loan deferment period has been extended to May 1, 2022. When it ends, you need to be ready to restart your payments.
Improve Cash Flow | If you found it challenging to keep up with your regular expenses, it may be time to look at cash flow. You may want to look for ways to boost your income by working more hours at your current job, doing some extra work on the side, or finding a new job with a higher income potential. You may also want to revisit your budget and see if there are any lifestyle changes that you can make to trim expenses. Think outside the box. Is your current home larger than needed? It may be time to downsize (or rightsize). That could free up cash that you can use to pay off debt and invest in your future.
Start Saving | After debts and cash flow are sorted out, it will be much easier to create a realistic savings plan and to stick with it. This can be accomplished by setting up a direct deposit as you get paid. If you never see the money, you probably won’t miss it. If you are saving for something specific (a down payment perhaps), consider checking out the MoneySmart Savings Goals Calculator. This can also be a helpful way to budget for larger annual expenses that can sneak up on you like home insurance, or vehicle registrations. Your savings plan can expedite having an emergency fund for potential job loss, unexpected hospitalization, etc.
Focus On Future | When you have your finances under control, you will be in a position to begin thinking about your long-term investment strategy. For most of us, this includes contributing to your company’s 401k or an IRA. Investing just a small amount each paycheck can have a big impact at retirement. Another tax incentive program you may want to take advantage of is a Health Savings Account if your employer offers it. A HSA offers tax-deferred contributions, and the money comes out tax-free if used to pay for qualifying medical expenses.
By implementing these resolutions, you will find yourself in a better financial place at the beginning of 2023. Wouldn’t that be great? We invite you to add any financial resolutions you have for this year in the comments below. If one of your resolutions is to purchase a home, contact us to get connected with one of our experienced REALTORS®.