If your goal is to improve your financial situation in 2022, the best way to achieve this is to have some clear and actionable decisions. Whether you’re looking to get out of debt, buy a home, save more for retirement, take your family on vacation or reach another financial goal, these expert-approved financial decisions will help you get there.
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stick to budget
“Instead of focusing on a specific amount of dollars (eg saving x dollars or paying down debt x dollars), you might want to consider ‘living on a budget’ your goal for 2022,” said Jay Zygmont, Ph.D., CFP. Founder of Live, Learn, Plan in Mississippi. “This means a commitment to preparing a budget at the beginning of each month and weekly budget meetings to check on progress.”
You may need to experiment with different budgeting techniques to find one that you can stick to.
“There are a lot of budgeting tools and techniques, and they all work in some way, but the best one is the one that works for you,” Zigmont said. “Your commitment should be that you live on a ‘zero’ budget, which means that every dollar has a purpose and function before the month begins. Keep in mind that your budgets will not be ‘correct’ at first, but it’s a matter of getting used to having a budget and checking it regularly.”
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Create an emergency fund
“If you have extra cash after reviewing your budget, make sure you have an emergency fund in place,” said Keri Kane, chief operating officer of Earth Equity Advisors. “A good general rule of thumb is to keep at least three to six months of living expenses, but it varies from person to person. The main reason for an emergency fund is to have enough money to continue to buy food and pay your mortgage or rent if your income drops or arises.” Unexpected bill.
If your budget doesn’t currently allow you to save, find out what expenses you can cut or ways to generate some extra income so you can build your own emergency fund.
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Make a plan to deal with your debts
“You can start relieving debt stress by setting small goals and working your way up rather than trying to tackle it all at once, which can overwhelm you and add to stress,” said Braxton Yoeman, business advisor at Success Financial LLC. “Understand where your debts are, know the numbers and make responsible financial decisions based on this knowledge.”
There are generally two ways to pay off debt – you start with the smallest debt or you start with the highest debt interest rate. There is no wrong way. Just start somewhere!
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Maximum your retirement contributions
In 2022, the 401(k) contribution limit increases from $19,500 to $20,500; For Individual Retirement Accounts (IRAs), it’s still at $6,000. These numbers are huge, but they may seem more achievable if you break them down further.
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“If your financial decision is to maximize your Roth IRA by putting in $6000, you can break that down into monthly contributions of $500 or, better, weekly [contributions] $115 worth, said Clayton Quam, partner and financial advisor at AP Wealth Management in Augusta, Georgia.
Automate your savings
“Assuming you pay off your monthly debt and have some money left, customize and automate the transfer of funds to your various savings accounts,” said Julie Meissner, CEO of Garrison Point Advisors. “Did you get a salary increase or a bonus? Consider increasing your contributions to your retirement account by the same percentage as the increase. Maybe use your bonus to get rid of a little 529s for your kids or jump on your ‘fun’ budget for the year.”
When you automate your contributions to your various accounts, this will ensure that you stay on top of your savings goals.
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Improve your credit score
“A lot of people still have poor credit scores, and the pandemic hasn’t helped pay the bills,” said Dean Kaplan, President and CEO of The Kaplan Group. Consumers should take the time to improve their credit scores, increase credit limits and stay on top of payments. With so many financial and credit reporting apps readily available, people can track their progress, report errors on their credit reports, and develop a better understanding of credit risk — ultimately preventing any additional financial burden.”
Some of the ways to improve your credit score this year include paying bills on time and keeping your credit utilization low.
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