The New Year is here. Do you feel like you have a good handle on your finances?
Many people start the New Year by making resolutions that are quickly forgotten whether they are related to personal, business, or financial goals. These resolutions can seem daunting and something that is easier to put off. Below are 6 achievable tips to get financially fit in 2022. This will hopefully turn into good habits to carry forward in the new year and beyond.
6 Tips for Financial Fitness
There are many things you can do to get ‘financially fit’. Some are easy and require virtually no work, and some may take a little more time. Here is a good start.
- Create a budget if you do not have one already. If you do have one, review it and make modifications based on last year’s actual income and expenses as well as adjustments to financial goals. A clear budget with detailed categories can help you set guidelines for what you can afford to spend, and help you identify areas where you could cut back. It is also a good tool to help with retirement savings. It can be compiled in a basic spreadsheet or writing it by hand on a piece of paper. Tip #6 below, offers a more sophisticated, comprehensive solution.
- Review your prior years’ spending. It is extremely helpful to layer those actual expenses into your budget for that period to see any variances. Evaluate those variances-was there a logical explanation, do I need to adjust for the coming year? This analysis is helpful in gaining a full understanding of where you are financially and plan more effectively for the next year.
- Have a primary and secondary savings plan if possible. The primary plan is for emergencies, i.e., job loss, car wreck, medical issue. That should cover 3-6 months of expenses, so it does not disrupt your budget. If you do not have 3-6 months savings for emergencies, focus on building that up. The secondary plan is discretionary savings. This refers to big purchases like a new home or a beautiful vacation. Typically, these are events that are 3-5 years down the road. Ideally you set up a savings account and arrange for a direct deposit out of each paycheck, so it is done, and you do not have to think about it.
- Consider investing if you can afford it and commit for the long-term (10-15+ years). Good options are traditional or Roth IRAs, Exchange-Traded and index funds. If your company has a 401K, make sure you set automatic contributions from each paycheck. Additionally, increase that amount if you receive a raise assuming you are not already contributing the maximum. Again, this is a long-term play-buying and selling and get rich quick schemes do not work and you might be penalized with capital gains taxes. If you have a lot of credit card debt, try to pay that down prior to investing.
- Establish a debt payment plan if this is an issue for you. This can be part of tip #3 or a separate account altogether. The most common source of debt is credit cards. A goal should be to pay your full credit card balance on time each month once you clear up any outstanding debt. This will also help improve your credit score. Don’t miss those monthly payments!
- Get set up in financial management software which will make tips #1, #2 and #3 easier. All the data from your financial accounts can be uploaded including historical data and custom categories and reporting can be created. This will absolutely help with financial organization, provide more visibility into spending, and help you make smarter savings and spending decisions. Remember, this work is all done to reach your financial goals.
Putting The Time in Now Will Pay Dividends Later
Most people strive for financial health and success. Getting your finances organized for the new year can help to achieve that goal. Some of the tips listed above take some work to accomplish, but a little work now can lead to great benefits later. Wouldn’t it be great if your credit card was paid off, or if you reduced a monthly expense while auditing your budget, or you are able to build your investment portfolio to provide for your retirement? You can get there, but it requires some effort.
You Don’t Have to Do It Alone-Getting Help
Working to establish financial organization and management for 2022 is a great step towards financial security and success. Completing a few of the tips above can make a significant difference for the better in this coming new year. Often it is better to have another set of eyes and hands to help with this. The Client Advocates at My Personal Bookkeeper can guide you in your journey, hold you accountable to your goals and will be your partner in achieving financial success. Contact us here today.
About the Author: Lisa Lipton
Lisa grew up in Northbrook, IL, and has lived in the Chicago area for most of her life, other than a few years spent in Baltimore, MD early in her career. Today she calls Deerfield, IL home. With an undergraduate degree in Advertising and a graduate degree in Integrated Marketing Communications, Lisa has 20+ years of experience working mainly in direct-to-consumer marketing with a focus on direct marketing for a variety of companies.
Having managed her mom’s care for several years as she struggled with failing health, Lisa understands and appreciates firsthand the need for the services and resources My Personal Bookkeeper provides. Also, being a busy professional herself, she recognizes that someone such as herself may need extra assistance organizing and managing their daily affairs. Lisa is very excited to combine her professional experience along with her personal empathy to spread the word about MPB and provide support for those who need a helping hand!
In her spare time, she enjoys spending time with family & friends, traveling, exercise, all kinds of music and loves to watch and play tennis.