Improve your financial life.
Embrace the allure of a fresh start with the new year. It’s a great time to commit to your money goals, budget better, pay down debt, ditch bad habits and improve your financial picture to reach your goals.
If you want 2022 to be a better year for your money, consider making these 12 financial New Year’s resolutions.
Budget, budget, budget.
Your entire year’s financial success likely rests on having a decent budget. “One important financial resolution for 2022 should be putting together a financial plan,” says Cynthia Pruemm, an investment advisor and the founder and CEO of SIS Financial Group in Hoffman Estates, Illinois. “Part of this process is doing a financial analysis of your income, expenses and investments.”
If you’re discouraged by the idea of being buried in data and can’t afford an accountant, Pruemm suggests using a software program like Quicken.
There are also plenty of personal finance websites and apps that can help with budgeting, including Mint.com, PocketGuard or You Need a Budget. Or you can go old school with a pad of paper and pen. But you can’t argue with a resolution like budgeting.
Save something every month.
One thing that should definitely go in your budget is how much you plan to put away in an emergency fund or savings account — or both.
“Another resolution should be saving every month regardless of the amount,” Pruemm says.
If you’re struggling with how to save money, Pruemm suggests Acorns.com, “where your spare change on each debit card or credit card transaction gets set aside into a separate savings account. You will be surprised how quickly all that spare change can add up.”
And when you’re shopping online, she says, “shop for the same products through (cash-back websites) Rakuten or Ibotta where you get quarterly refunds for simply shopping through their website.”
Pay yourself first.
Paying yourself first generally means “paying” your future self money. It’s important to do it first because if you pay yourself last, chances are you won’t pay yourself at all.
An easy way to pay yourself first is by contributing to a 401(k), especially if your employer offers matching contributions, says Brian Stivers, an investment advisor and founder of Stivers Financial Services in Knoxville, Tennessee.
“I suggest you set a goal of setting aside 10% of your income each month for a future need such as retirement,” he says. “If your employer matches up to 4% of your annual income, then you would only need to contribute 6% of your income to pay yourself 10% of your income for retirement.”
Paying yourself first every can also mean putting money into a savings account or an emergency fund before you pay for other expenses.
Evaluate your eating-out budget.
Stivers suggests finding cheaper restaurants — or, of course, you could always cook more.
“It isn’t unusual for a couple to eat out three to four times a week when both are working,” Stivers says. “Whether this is takeout or dining in, this could easily add up to $100 to $200 a week or more.”
It’s even worse for your budget, of course, if you have kids and are eating or ordering out three to four times a week.
“So if the ‘eating out’ budget was cut in half to $50 to $100 a week, and you placed the money in a savings account at the bank, or even in a savings jar at home, by the end of 2022 you will have saved $2,600 to $5,200 a year for other needs, goals or dreams,” Stivers says.
Review your subscriptions.
Take a look at every service you subscribe to and see if there are any you could eliminate, Pruemm suggests. “It happens all the time — you sign up for a free 30-day trial and forget to cancel when the trial ends. You tell yourself you’ll cancel the subscription before the next automatic deduction and life happens and you forget yet again.”
She has a good point. These days, it isn’t only entertainment streaming subscriptions to keep track of, but others from cosmetics to razor blades to meal plans. It used to be that coffeehouses were a hotbed of money mismanagement, according to personal finance experts, but in recent years it’s subscriptions.
Start investing.
Investing goes hand-in-hand with the “pay yourself first” resolution that we mentioned earlier.
“Set a monthly plan of investing x dollars every month and stick with it, regardless of what is going in the markets,” says John Hunter, the MBA program director and professor of practice at Le Moyne College in Syracuse, New York.
There is plenty of guidance available on building a beginner investment porfolio. Hunter advises investing with a longer-term mindset.
“Follow the historical market returns and don’t even think about the ups and downs of the markets. Don’t try to time the markets. The markets are smarter than you are. Think long term, act long term, be disciplined and you will get to your goals,” he says.
Make a will.
Having a will is important, especially if you have a lot of assets.
“If you don’t have a will, make 2022 the year to have it written,” says Brian Porter, professor of management at Hope College in Holland, Michigan. “It isn’t necessary to hire an expensive attorney and pay several thousand dollars. Alternatively, there are online will makers that cost very little, around $100. These include Quicken Willmaker & Trust and LegalZoom.”
Maximize credit card rewards.
Porter offers a more fun financial resolution for credit card holders: Maximize your credit card cash back, miles or points rewards.
“Hopefully you already pay off any credit card debt monthly and pay no interest charges,” Porter says.
If that’s the case, he suggests applying for a new rewards credit card if you don’t have a good one already.
“There are numerous reward credit cards offering generous enrollment bonuses, such as 100,000 miles for spending $3,000 during the first three months. The bonuses are often valued at $1,000 or more,” Porter says. “The $3,000 threshold needed to earn the bonus is easily achieved with purchases you may already have to make such as auto and homeowners insurance.”
Analyze your insurance.
This may feel like a chore, but it’s a smart financial chore to do, says Siyu Wang, a behavioral economist at the Institute for the Study of Economic Growth at Wichita State University.
“You may want to reconsider your insurance choices at the beginning of each year, especially 2022. Without so much uncertainty, do you want to pay more for your health deductible?” Wang says.
Aside from evaluating your health insurance choices during open enrollment, take a good look at your homeowners insurance or car insurance. Have you had those policies forever? Maybe you’re paying too much. You also may want to buy some insurance.
“Do you and your family have life insurance? Have the beneficiaries been set up appropriately?” Wang asks. “These scenarios may seem far away, but it is always better being prepared.”
Pay down debt.
Especially if you’re in your 30s or older with a large amount of debt, coming up with a plan to reduce what you owe is really important, even if you have to make some financial sacrifices to do it.
“If you cannot reduce your debt to zero, try to minimize the balance. In order to enjoy your financial freedom, it is important that you have control over how much money you owe, no matter what the purpose of the debt is,” says Ganesh Pandit, an associate professor of accounting at the Robert B. Willumstad School of Business at Adelphi University in New York.
“Remember, in the end, you want to wake up each day knowing that you have control over your financial situation and hence over your life,” Pandit says.
If you plan to refinance, do it soon.
If refinancing is on your agenda, this shouldn’t be left until 2023.
“If you have a house and have not refinanced yet, what are you waiting for?” asks Stacy Mastrolia, associate professor of accounting at Bucknell University‘s Freeman College of Management in Lewisburg, Pennsylvania.
“For years, interest rates have been the lowest in history, but there are signs — specifically increasing inflation — that interest rates are likely to rise in the near term. The opportunity to lock in today’s historically low rates for most people’s largest monthly payment and largest asset may be coming to an end,” she says.
Start a 529 plan.
As college tuition costs rise, it’s especially important to save early with a 529 plan, a college savings account that’s exempt from federal taxes.
“While 529 college savings plans have been in existence since 1996, they are still not extensively used by families,” Mastrolia says. “Of families that are saving for their children’s college expenses, only 30% of savings are in tax-advantaged 529 accounts.”
She points out that 529 plans offer federal tax-free growth if the account is used for qualified education expenses, and that could include not just college but tuition for private school as well.
12 Financial New Year’s Resolutions for 2022:
— Budget, budget, budget.
— Save something every month.
— Pay yourself first.
— Evaluate your eating-out budget.
— Review your subscriptions.
— Start investing.
— Make a will.
— Maximize credit card rewards.
— Analyze your insurance.
— Pay down debt.
— If you plan to refinance, do it soon.
— Start a 529 plan.
More from U.S. News
12 Steps to Achieve Financial Freedom
Clever Ways to Track Your Money Goals
Apps to Meet Your Financial Goals
12 Financial New Year’s Resolutions for 2022 originally appeared on usnews.com
Update 11/08/21: This story was published at an earlier date and has been updated with new information.
