The pandemic has made the last few years rough for a lot of people. But 2022 can be different. The new year is your chance to hit the reset button and feel good about your finances again. Use these tips to put yourself in a position to have your best financial year ever.
Create a budget that works for you
You don’t need to get a higher paying job or hit the lottery to improve your finances. Often, the problem is you don’t properly manage the money you already make. Most people can benefit from using a budget. Yes, we know many people hate the “b” word, but it works wonders. The key is to create a budget that’s realistic, not restrictive. You can still do all of the things you enjoy, you just have to be able to afford it. So, calculate your monthly take home pay, then divide the funds how you see fit once you’ve covered your necessities (rent, utilities, food, transportation and insurance).
Trim unnecessary spending
We’re all guilty of paying for at least one subscription we hardly use. Maybe you signed up for a trial period and forgot to cancel in time. Or simply got too busy to enjoy the service like you used to. Either way, the money is still coming out of your account each month. Go through your bank and credit card statements and cancel any services you no longer use. You may be surprised by how much money you save.
Grow your savings
There’s no such thing as having too much money. So, save, save, and save some more. Lots of money experts recommend saving at least 20% of your income each month. But less is fine if that’s all you can afford. You can always increase the amount when your budget allows it. The important thing is to start now and be consistent. Setting up automatic transfers will make saving a breeze. Just tell your bank how often you want a certain amount transferred from your checking to savings and boom, you’re done. Sit back and watch the money pile up.
Deal with your debt
Carrying a credit card balance is bad because of the high interest rates which usually range between the teens and 20s. If you’re only making the minimum payments, it can take you years to pay your balance in full. Yikes! Make a plan to tackle your debt so you can stop wasting money. Here are some strategies you can use to pay off your debt faster.
- Pay more than the minimum balance
- Start with your smallest balance (snowball method)
- Pay off the most expensive debt first (avalanche method)
- Don’t take on any additional debt
- Take advantage of balance transfers
Check your credit report
It’s easier to get a loan and qualify for the best interest rates when you have good credit. So, make sure yours is in good shape. Typically, you’re entitled to a free copy of your credit report annually from each of the credit bureaus, Equifax, TransUnion and Experian. However, due to COVID-19 you’re currently allowed free weekly online reports from AnnualCreditReport.com. Download yours now to make sure the information is accurate. If you’re looking to improve your credit, the best thing to do is pay your bills on time and in full each month. Also aim to spend less than 30% of your available credit.
Boost your retirement savings
It doesn’t matter if you’re 20, 30 or 40 years away from retirement, you still need to start saving today. The earlier you start, the more time your money has to grow. So, if your employer offers a 401k, make sure you enroll and contribute enough to at least receive the full match (aka, free money). Alternatively, you can open a Roth IRA and save on your own. Savers have until April 15, 2022 to make contributions for 2021. The contribution limit is $6,000 ($7,000 if you’re age 50 or older).
Earn more money
Increasing your income will provide more financial security and help you achieve your goals faster. There are numerous things you can do to earn more money. You can ask your boss for a raise, search for a new higher paying job or start a side hustle. Some profitable side hustle ideas include selling stuff, delivering food and groceries, tutoring, babysitting, and cleaning houses. The possibilities are endless as long as you’re willing to do the work.