Your financial life is ever evolving. It is not a “set it and forget it” type thing.
As we get ready to embark on a new year ahead, here are five tips you can use to improve financial health for yourself this year.
5 Steps To Improve Your Finances in 2022:
1. Review your credit report: Make sure you are paying down your debt which can help to increase your credit score. Why should you care? You’ll actually often pay MORE for rent, deposits, and car insurance when you have a poor credit score. Then there is the obvious impact of higher interest rates on credit cards or mortgage.
An article from Nevada State Bank reveals that, “Contrary to popular belief, credit scores are not part of your credit reports, although credit scores are calculated from data on your credit reports and may be delivered along with it,’ explains Equifax. “You also may not know that you may have more than one credit score – each credit bureau or company that provides credit scores calculates them using different credit scoring models. Because of this, your credit scores may vary. Another reason your score may vary is that the underlying credit data may be different, since not all lenders report to all three nationwide credit bureaus.
Some report to only two, one, or none at all.” We recommend getting the three main bureau reports at www.annualcreditreport.com. Due to the financial hardship and increased scammers they still offer a free credit report weekly if you need it. However, you should at least review it once a year! Correct any incorrect data asap. You won’t get your score for free, but there are other ways to get a close idea of your credit score and whether it’s going up or down, such as www.CreditKarma.com or maybe even your bank offers it. It’s good enough unless you’re applying for credit such as a mortgage.
2. Set some 2022 budget goals for the New Year: What do you want to accomplish financially over the next year? Put together a little list of 5-10 financial goals, no matter how big or how small. Then narrow those down to figure out which of these goals are the most important to you, and start brainstorming an action plan of how to get there. If you can start planning for it now, you can more easily map out your path to success for the year ahead. Preplanning your goals will help you stay on track with your 2022 budget for the whole year.
3. Remove unnecessary automatic expenses: What did you pay for all last year that you didn’t use once? (I’m looking at you, gym membership!) Auto-billing and subscription services can be some of the easiest ways we spend beyond our means. Ask yourself what you’ve been wasting money on, and start figuring out where you can pair down for your 2022 budget. Cutting back on the extraneous expenditures will help you to better achieve your financial goals in 2022. How many entertainment subscriptions do you really need? Think it doesn’t matter because it’s only $15 / month? What could that extra $180/year do for you, x 10 years… Now it’s $1800!
4. Set up your emergency fund: If you haven’t been able to create an emergency fund in the past, or you used that money this year, make sure you create a plan to bulk up your emergency fund and include it in your 2022 budget. Life in a pandemic has taught us all that anything can happen overnight. Be proactive now so you don’t have to be reactive later. We recommend a starter emergency fund even if you have debt you want to kill of at least $1000 -$2000. It’s more like INSURANCE against using credit cards.
Then if you truly have an emergency (think car or medical) and have to dip into it, stop your debt reduction and refund it at once! Eventually we want you to have a good 3-6 months of your basic expenses just in a simple account (not invested) for those moments. I promise, once you have a good emergency fund, you’ll have fewer EMERGENCIES because you’re planning for life now!
5. Review those big expenses: Look back and review any of those big yearly or quarterly payments you have to make (HOA fees, insurance, tires, etc.) Plan now for these large payments so you don’t get blindsided by them when the moment arrives to pay them. We recommend you split them up and save 1/12th each month and then when that fee comes due, you pull it out of your “sinking fund” and pay for it. Did you know that oftentimes you’ll pay less when you pay every year or even 6 months at a time on insurance?
Why should you pay extra because you didn’t plan ahead? It can take a little while to have the cash flow to do this, but when you realize every little bit helps you reach those goals you set, you look for the leaks in your life. $5 /month = $60. Keep it in your pocket, not theirs!
If you want expert guidance on creating your 2022 budget or how to create a financial plan that will set you free this year and forever more, schedule a free discovery session with me.
