As we say goodbye to 2021 and welcome the new year, over 90 million Americans will be making New Year’s resolutions. Some of the more common resolutions will be financial in nature, whether it’s to save more, finally start investing, or perhaps open that college savings fund for the kids. If this is the year you finally commit to your financial goals, or maybe you didn’t achieve your financial resolutions last year, the following list will help to give you direction and momentum you need to make 2022 a successful one.
Make a Realistic Budget and Track It
Americans are on pace to end 2021 with over $950 billion in credit card debt, which makes sense considering less than 50% of adults have a budget in place. With interest rates expected to increase in 2022, there’s never been a better time to get your cash flow in order and reduce your dependency on debt. Start by taking an average of your last 3 months expenses and prioritizing items based on importance. Housing, food, and healthcare are typically at the top, followed by things such as utilities, vehicle payments and entertainment. There might even be low hanging fruit like monthly subscriptions that are little used and can be eliminated.
Build Up Emergency Savings
Now that your budget is in place and you have positive cash flow, it’s time to begin building up your emergency fund. This is the foundation that all other financial decisions are based upon. The typical recommendation is to hold 3-6 months expenses in a savings account at the bank, although you might be more comfortable with up to a year’s worth of expenses tucked away. The next unplanned expense is right around the corner, and without the necessary funds in place you might be forced to add thousands of dollars back onto that high interest credit card.
Sign up for Your Company’s 401(k)
If your employer offers a 401(k) and you are not participating in the plan, you might be leaving money on the table in the form of your employer match. Most financial planning studies recommend that you contribute at least 15% of your gross income to a 401(k), but if you don’t feel like that is realistic at this point, at least contribute enough to get your full employer match.
Make Sure You Have the Proper Insurance in Place.
It’s probably been a while since you have reviewed your insurance. Now is the time to make sure you have the proper amount of life and disability insurance in place. As Covid has shown us, life can be precious and unpredictable, and it’s important to have this coverage in place now to protect yourself and your loved ones. It would also be wise to review your home, auto and any other valuable possessions that are insured to make sure that the proper amount of coverage is in place. You might even be able reduce your payment through another provider, freeing up more cash that can be used towards your financial goals.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.