The last couple of years has been tough for everyone. Prices are rising in the stores, and lots of companies are cutting jobs. It’s created a real financial pinch across the board. It’s enough to make you want to seize the reins of your finances and set yourself up for future success.
If you have some financial goals in mind for 2022, you’ll need a plan. Maybe you want to save up for a down payment on a house or clear out your credit card debt. Anything that puts you on the path to greater financial stability is a good idea. To help get you there, consider these eight tactics.
1. Get a Secured Credit Card
This isn’t like the unsecured credit card you can get from your bank. Those are based on your income level and credit history (usually meaning at least a 670 credit score). If your credit score is lower, you probably won’t qualify for a more traditional credit card. That’s OK, though.
According to Chime, a secured credit card can help you rebuild your credit and give you greater financial control. It works like a debit card, but it reports to the credit bureaus. Load it with your money and use it like a regular credit card. Make payments once or twice monthly. Your credit score will improve, giving you more financial wiggle room.
2. Make SMART Goals
Yes, make smart choices, but also make SMART goals. These are specific, measurable, attainable, relevant, and time-based. For example, maybe “saving money” is a financial goal this year. That’s great, but what does it mean? To make your goal SMART, add a dollar amount and deadline. Maybe save $2,000 by December.
SMART goals are helpful because they break your objectives up into mini-goals you can reach. Saving $166 monthly sounds much easier than a $2,000 lump sum, but it’s the same thing stretched over a year. Taking small bites at your financial goals instead of taking big gulps keeps you from getting overwhelmed.
3. Prioritize Your Plans
List your financial goals, but understand they’re not all equally important or time-sensitive. You’ll control your finances better if you categorize your goals as critical, a need, or a want. A list tells you where to apply for your money first.
You can’t plan for every expense. Some things — like a car repair — just pop up, and you’ll need cash on hand to pay for them. So creating an emergency fund could be a “critical” goal. Conversely, if you’ve thought about upgrading your car (but it’s working fine), it’s definitely a “want.”
4. Make a Budget
You’ve likely heard about budgeting your entire life. It doesn’t sound fun, but it works. Creating two types of budgets — yearly and monthly — can keep you financially on track. Write down your income and all your expenses so you know exactly where your money goes.
Sticking to your budget keeps you from being like Robert Palmer. Even if you think an item is “simply irresistible,” you’re less likely to spend money on things you don’t need. You’ll know where your money went, and you probably won’t end the month low on funds.
5. Plan for Emergencies
That emergency fund we mentioned can be a financial lifesaver. Whether it’s car trouble, medical expenses, or appliance maintenance, unexpected expenses happen. Without money in reserve, these problems can send you into a financial tailspin.
Start by setting aside a specific amount monthly into your emergency fund. Begin with an annual $1,000 goal. That should be enough to cover most major surprises, at least in part, without putting you in a bind. Over time, add more to this account, building it into a three-to-six-month cushion.
6. Focus on Debt
Nothing feels more like a weight around your neck than a huge bill. To meet your financial goals, chip away at existing debt.
Heavy credit card balances could cost you more than you realize. Current interest rates hover around 16%, but they could go as high as 30%. If you only pay the minimum and carry a balance, you’ll pay a lot in interest. It’s like giving the bank free money for years.
You can whittle it down by making scheduled payments. Shoot for two payments monthly so you’re paying more than the minimum. A debt calculator can help you get on a schedule.
7. Pay Yourself First
We know this sounds tough. After all, you must pay your mortgage or your rent, right? Trust us, though. Paying yourself first puts you on track for reaching your financial goals. Decide how much you want to put away into savings monthly and pay your bills with the rest. A good rule of thumb is to set aside 10%.
You can do this without consciously pulling money out of your checking account every month. With each paycheck, set an automatic transfer from your checking to your savings account. This way, your bank shifts the money to your savings (or retirement or mutual fund) before it pops up in your checking balance. If you don’t see the funds go in, you won’t miss them.
8. Improve Your Financial Literacy
Finances are complicated — payments, due dates, minimum balances, and interest rates. It can be confusing and overwhelming. Unless you have a knack for numbers and money, you’ll need some help. Financial advisors are great, but they’re expensive. If you’re trying to reach financial goals, spending that money could undermine your efforts.
Don’t worry — free help is available! You can find free financial calculators online as well as free credit counseling services. Nonprofit organizations, such as the National Foundation for Credit Counseling, can help. MyMoney.gov can also help you improve your financial literacy.
Managing your finances can be tough, especially when you’re juggling monthly bills. Still, you can plan for and meet your financial goals with a little bit of work. Keep track of your money, watch where you’re spending it, and learn how your money can work for you. Follow these tips, and you’ll be in a great place to achieve your 2022 financial goals.
