The start of a new year is a clean slate, which is why New Year’s resolutions are such a popular thing to make. Now you can have some goals for 2022: exercise more, eat healthier, and spend less time wasting on social media. But it’s also a good idea to set financial goals. Here are four to aim for.
1. Build an emergency fund
An emergency fund might be the only thing to bail you out when unforeseen bills hit or your income takes a hit. Ideally, you should have enough money in your savings account to cover three to six months of essential living expenses. You can use an emergency fund calculator to determine how much money you should aim to have in reserve.
If you don’t have a full emergency fund, creating one should be your top priority for 2022. If you have some savings but think you could use some extra protection, then increase your emergency fund – say, from three months cost of living to five months – is another big goal to aim for.
2. Pay off high interest debt
It is one thing to have a mortgage or to owe money in the form of a car loan. But it’s another thing to have a nagging credit card balance. And if you’re in that latter boat, it’s worth putting paying down that debt at the top of your list.
The problem with credit cards is that they charge a lot of interest every time you don’t pay your balance in full. Then, the longer you carry over your balance, the more interest you earn. Eliminating that debt should be high on your priority list, mainly because it could save you a lot of money in the long run. Plus, paying off credit card debt could actually help improve your credit score.
If you owe money on various credit cards, it might be beneficial to consolidate that debt through a balance transfer, especially if you qualify for an offer with a 0% introductory rate. Otherwise, your goal should be to pay off your credit cards in order from the highest interest rate card to the lowest interest rate card.
3. Save for retirement
Your retirement will not pay for itself. You may be entitled to social security money, but these benefits are not enough to support most elderly people in the absence of additional income.
This is why building your own nest egg is a good bet, and the sooner you start, the more time you will spend on your money growing. If your employer offers a 401 (k), you can sign up to participate in this plan and have money deducted from your paychecks. Otherwise, you can open and save an IRA.
4. Stick to a budget
Budgeting – and sticking to it – might not be the most exciting thing you can do in 2022. But it’s a vital step on your way to managing your money.
Without a budget, you might lose track of how much you’re spending on different expenses. And that could make it difficult to accomplish other goals, like saving for emergencies or paying off debt.
Rather than soar on the expense front, take the time to budget. Create a spreadsheet of your different expenses or find a user-friendly budgeting app that will help you identify your different expense categories and link your credit card charges and checking account withdrawals to those categories.
Many people are excited to ring the New Year. If you hope to improve your financial situation, these resolutions are worth making. Think about your needs and set goals that are important to you. You may not have unhealthy debt and have lots of savings, but you may be hoping to start a business or buy a house. Set your own priorities so you know what to focus on in 2022.