In a recent Fidelity survey, 43 percent of Americans said their top financial resolution for 2022 was to save more. Meanwhile, another 41 percent said they are aiming to pay down their debt this year. Whether it is getting better at budgeting your money or decreasing your reliance on credit this year, it all comes down to wise money management. Kickstarting simple money management tricks in your financial life can go a long way in helping you achieve your financial resolutions this year. Best of all, you can start them today.
Save More This Year: Create A Realistic Budget And Track It Regularly
The good news: Americans are budgeting more than ever before. The latest research released by Debt.org showed that 80 percent of people are budgeting now. In the same poll, only 68 percent were doing the same. The bad news: a significant percentage of them end up deviating from their original budget. The key to making budgeting work for you and your savings goals is to check in regularly.
It is also important to tailor your budget to your financial life, goals, and commitments. Narrow it down to your largest and most relevant outgoings such as rent, food, or travel. This gives you a better insight into where the highest spends are, and where you can make cuts. Remember to review your budget regularly so you can adjust it to any changes in your financial circumstances such as a change in income, a switch to work from home, or a family member moving in with you.
Pay Down Debt This Year: Tackle High-Interest Debt First
When it comes to paying off your debt, focusing on high-interest debt like credit cards and payday loans can be quite effective in helping you make progress on your debt total. This is because debts with higher interest rates often allocate more of your repayments to interest charges- meaning the principal borrowed reduces less. They also accrue more interest which drives up your debt over time.
One way to combat this is to consider switching your high-interest debt to lower-interest credit cards or capitalizing on balance transfer offers. This cuts the interest you end up paying and means you can pay off your credit card debt faster. Another tip: look for ways you can capitalize on savings that come with the current changes. For instance, you can also redirect any saved travel funds to pay off high-interest credit cards. Similarly, with more people working from home, using your unused transport budget to pay off expensive debt faster means you will find yourself paying less in interest.
Be Prepared For Financial Emergencies: Create A Rainy Day Fund
With the uncertainty of the pandemic and surprises that can pop up, building an emergency fund is now more poignant than before. In fact, 37 percent of Americans worry that they have not put away enough in the emergency funds, according to a National Endowment for Financial Education survey. It is recommended that you aim for an emergency fund of at least 6 months in expenses. If you are not sure how much your emergency fund should be, use one of the many emergency fund calculators to get an idea.
When it comes to building up your emergency fund, a good way to start is by automating your monthly savings. Once you have worked out your budget and identified savings, you can set small, regular savings into a separate account. Many banks now offer a savings automation feature to help with this. For an additional boost to your emergency fund, consider starting a side hustle this year to boost your income. Check out available side gigs such as freelancing or data entry jobs to see what matches your schedule.
Finally, don’t feel pressured to make these changes all at once. Map out a sustainable financial plan that you can stick to throughout the year. Once you have a clear plan, you can then focus on ticking off your financial goals one by one in 2022.
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