Want To Improve Your Finances In 2022? Set These 7 Goals
Money drives many decisions that we make day to day. If you plan ahead, then that makes a pretty dramatic difference in your overall retirement financial planning needs. Financial goals set the tone on what we spend on and how much we can save for the future, both for the short term and for the future. Either way, it’s often easier to reach your goals if you identify them in advance.
Include these as part of your financial goals for 2022:
1. Have a budget to start with
Master your cash flow. Nothing gives you greater control over your financial life than knowing exactly where your money is going. Setting up a budget and then diligently following it might not seem like a big deal, but it’s essential for managing money matters. Without a budget, it’s very easy to lose track of how much you're spending in different areas of your life. If you spend more than you make, you’ll end up having to pay back debt. But if you spend less than your income, then you can maintain a lifestyle you can afford and still be able to have savings for the future. Know what life goals you want to achieve and then plan how much time and money you will need to make that happen.
2. Aim for bite-sized financial improvements
Just like a new year's resolution, set yourself smaller goals that are more achievable, rather than big fat goals where you’re likely to fail if they take too long to succeed. For example, instead of having a broad financial goal “to be financially stable by the end of 2022”, have a smaller, specific goal with achievable parameters, such as reducing overall spending by 10 percent. You can track your spending month to month on a spreadsheet, and see which area is easiest to trim the fat from (eating out, shopping, drinking, etc).
3. Augment your income
Creating multiple income streams is not only a form of income insurance in case you get retrenched or your business fails, but it also allows you to start planning for that early retirement dream. Even if the side hustle is only a part-time cash flow, it can even help with paying off debt, or put into other investments to start building up savings.
4. Pay off (credit card) debt immediately
It's one thing to have a mortgage or have a car loan, but it’s quite another thing when you have an outstanding credit card bill to pay. While it's convenient to shop cash free all month, most people don’t realise that credit cards charge crazy interest rates whenever you fail to pay your balance in full. Then, the longer you carry your balance forward, the more interest you accrue. Knocking out that debt should sit high on your list of priorities, mostly because it could save you a lot of money in the long run. Naturally, aim to pay off your credit cards in the order of highest interest rate card to lowest interest rate card.
5. Build an emergency fund
A big life lesson the pandemic has taught us is to have a healthy emergency fund, one that is ideally large enough to cover your essential expenses for at least a year if possible when something big and unexpected happens. Financial advisers often recommend putting money (and energy) towards building an emergency fund first, rather than aggressively paying off debt. Aim to start saving 5%–10% of your monthly income (or whatever you can afford) and then only use that money when there is a serious emergency. Bonus: Whatever you don’t use can automatically add to your retirement fund.
6. Buy just enough insurance to protect yourself
Having adequate insurance coverage is hard to get right. Sometimes you just don’t have enough coverage, while other times, you might be paying too much for it, so striking a balance between the two is a good financial goal to strive towards. If you are a safe driver, you could probably get away with having a low cover of car insurance, but don’t scrimp on life and health insurance, as those costs can stack up very fast.
Money experts like Tony Robbins always say that giving away money is one of the best ways to experience real joy and happiness. It doesn’t matter how much you are able to share; what’s more important is the fact that you start. Sharing your good fortune with people who are less fortunate proves that you aren’t controlled by money and aren’t afraid of going broke by donating. What-goes-around-comes-around, so you’ll always get back what you give away.