As 2022 sets in, many people hit the refresh button, setting new goals or reinstating old ones. This new beginning is a great time to come up with resolutions for financial health, looking for ways to improve your money habits with new budgets, new savings plans, and new goals to pay down debt.
Reset your budget
Budgeting is an essential cornerstone of financial health. The financial landscape of your life changes from year to year as you settle into your career (or make a big career shift), buy and sell investments, grow your family, or handle unexpected financial challenges. Budgeting can help you strike a balance between taking care of necessary financial obligations, saving for long-term goals, and having cash to spend on things that bring you joy.
Tip 1: Use the 50-20-30 Rule
One of the most standard budget structures is the 50-20-30 rule. In this setup, 50% of your monthly income goes towards necessities like rent or your mortgage, utilities, and groceries, 20% goes towards savings and paying off debt, and 30% goes towards your “spending allowance” for things like eating out, shopping, and subscriptions.
Tip 2: Calculate your monthly net income
In order to make your budget as accurate as possible, it’s important to know how much money you’re bringing in and how much is going out.
Make a list of all your earnings in a month, minus taxes and benefits. Don’t forget to include any additional sources of income, such as freelance work or passive income.
Use the 50-20-30 rule to divide up your expenditures and apply that to your monthly net income.
Now you have a picture of where your money is going and can make necessary adjustments.
Repay your debt
An important step on the road to financial health is to manage your debt as responsibly as possible. For some, managing debt can be one of the hardest financial goals of the new year. Here are a few practical ways to tackle this goal.
Tip 1: Review your credit report
Your credit score is a helpful metric to assess your financial health. This “score” is based on your credit history—the number of open lines of credit or loans you have, your repayment history, and so on.
Understanding your credit score can also help you understand where you stand when it comes to some of your larger financial goals for the new year, like buying a house or taking out a small business loan. It can also give you a good sense of where you can improve some of your money habits, particularly when it comes to debt. As a Keesler Federal member, you can keep track of your credit score with SavvyMoney.
Tip 2: Make a plan
Once you understand some of your lending habits, you can set up a plan of action. For example, are you notorious for putting off your credit card payments? Maybe 2022 is the year you focus on making every payment on time. Are you struggling to make payments on lines of credit with high-interest rates? Perhaps a financial goal for the new year could be combining what you owe into a single monthly payment on a low-interest credit card.
Revisit your savings goals
For many people, saving money is one of the top financial resolutions of the new year. Whether you’re planning a big purchase or stowing money away for the future, setting aside money into a savings account is a great way to ensure that you’re keeping your financial goals on track.
Tip 1: Set up automatic deposits
Automatic deposits are one of the easiest ways to make sure you’re always stashing a bit of money into your savings account.
If you use direct deposit for your paychecks, you can add your savings account and send a set dollar amount or a percentage of your pay to it each pay period. You can also set up recurring, monthly transfers from your checking account to your savings account.
Tip 2: Reassess your emergency fund
Another important New Year’s resolution for financial health is to build out your emergency fund, a stash of money that could cover costs in the case of an unexpected job loss or a medical expense. Experts recommend having at least three months’ worth of expenses saved away in this fund, so make sure you’re taking that into account when building your budget.
Tip 3: Increase your retirement contributions
While you’re building out your emergency fund, it could be a good time to look at how much you’re contributing to your retirement fund (or start one, if you haven’t already). Saving for retirement can be challenging since it’s hard to say when you’ll retire and what your financial needs will be at that time.
But it’s never too late to start! Some experts recommend saving about 15% of your annual salary towards retirement. If your employer offers a 401(k) with a match, 2022 is the year to take advantage of that, or even up your contribution a little bit. Maxing out your employers’ match is a great way to save a little extra for your golden years.
Ready to set your financial resolutions for 2022 in motion? Start by setting up a savings account with Keesler Federal Credit Union—we have a variety of account options to suit different saving needs, whether you’re saving for college, a dream vacation, or a down payment. Financial health is within your grasp, and we’re here to help.