When January rolls around, many pin their hopes on resolutions related to health and wellness or new skills or hobbies; however, one area of aspiration that shouldn’t be overlooked is financial health. Given the economic instability of the last couple of years, 2022 will be a crucial year for many in terms of financial recovery and recalibration. Take time now to revisit goals set previously, fine-tune as needed, and look ahead with confidence to the new fiscal year!
Pay Down Debt
Although, nationally, credit card debt actually fell during the pandemic year of 2020, the figures are still shocking: Americans owe around $800 billion in credit card debt, according to Experian, with an average of over $5,000 per household. This year, make it a point to get serious about paying down/off debt. Always pay more than the minimum payment; set a goal to pay off as much as possible, starting with accounts with highest interest rates, by planning exactly when and how much you’ll allocate for which debt each month. If possible, refinance debt for a lower fixed interest rate.
Build Your Credit Score
Everyone is entitled to three free credit reports each year, one from each of the three nationwide credit reporting companies. Keep a close eye on your credit for accuracy via these reports or a credit monitoring service and promptly address any errors you encounter. A poor credit report could have many adverse effects on finances, including paying higher interest rates and being rejected for loans. Though building better credit takes time, paying bills on time and utilizing a low percentage of available credit (under 30%) are two simple steps on the right path.
Make a Realistic Budget
January is the ideal time to institute a realistic household budget, after determining exactly how much your household is bringing in after taxes and into what “bucket” that income is going (e.g., utilities, housing, travel, etc.). Keep track of your monthly spending; there are many popular apps available, such as Mint and You Need a Budget, to help assess expenditures and stay on track. For those who struggle with monthly – or more long-term – budgets,experts suggest that weekly budgeting may be more manageable. Understanding where your money is going each month is key to reaching all your other financial resolutions.
Consider Retirement Savings
You likely have a retirement plan (e.g., 401(k)) set up through your employer to which you’re already contributing. This year, work toward maxing out your contributions to your savings vehicle; if that’s not possible, be sure to take advantage of your company’s match contributions – or aim for 6 percent of your yearly salary if your employer doesn’t offer a match.
About the author: Our guest writer, Shauna Osborne, writes for Treesdale Life, of which this article appeared in the January 2022 issue.
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