We’ve all been there. You make your resolutions with so much excitement and determination on the first day of the year but it only takes a few months, or even weeks, for you to give up on them and fall back into old habits. Well, you’re not alone and you’re not entirely at fault.
Life happens and you somehow forget to keep your new goals going. The problem doesn’t have to do with a lack of willpower, but it does have to do with the lack of a proper plan. You can’t just wish for something and hope that it’ll come true just because you wanted it to – especially not when it comes to money-related matters.
Here are the top 5 most common financial goals that Americans are looking to accomplish in 2022, according to Bankrate. We’ve also added some advice on how you can actually tackle each of them!
Paying Off Debt
Paying back debt seems to be the foremost thing on Americans’ minds this year. While the last couple of years has been a struggle, financial and otherwise, it seems that people all around the world are faring better. Most of us see 2022 as a new horizon, albeit very cautiously. This may be why people want to get rid of debt and start over with a clean slate.
To get started on your goal, the first step is to acknowledge all the debt you have and make a list of them all from smallest to largest. While you would think it’s more logical to tackle the largest debt first, most financial experts agree that it’s better to start from the bottom. Take any additional cash you may have and use it to pay off the smallest debt, and once that is done, you can focus on the next one.
Trying to take on the largest debt you have first would be a massive financial burden, and you are basically setting yourself up for failure. Going at it from smallest to largest will give you lots of little wins along the way, encouraging you to keep the momentum going.
Building an Emergency Fund
It’s great news that Americans are focusing on saving for a financial emergency because if the last two years have taught us anything, it’s that we need to be prepared for anything.
The best way to go about building an emergency fund or a “rainy day fund” is to set it and forget it. You can set up automatic payments from your bank account so that there is a portion set aside for the emergency fund the moment your salary comes in. The less you have to think about, the less risk there is of being tempted to spend it on something else.
Sticking to a Budget
One of the reasons that people give up budgeting is because they find it too difficult to stay within the spending limits they set for themselves and give up on the whole thing. However, a budget is a crucial tool when it comes to money management and financial freedom. So, if there is one thing you do in 2022, it should be learning how to follow a budget.
The first step to budgeting is to track your spending over the period of the month. Whether you do it the old-fashioned way with a pen and notebook or you opt for one of those fancy smartphone apps is up to you. This will help you identify the “leaks”, i.e., the places where you spend money unnecessarily so that you can redirect that money to a more beneficial place.
Another way to control your spending is to take stock of the things you’re spending on. Is it really important that you buy that new gadget just because it’s on sale? You have to realize that sales don’t save you money because you’re still spending it!
If you already have a budget but are finding it difficult to stick to the spending limit, try to adjust your budget to accommodate some of the extra spendings. If you are finding it difficult to stop eating out, try to find other places in your budget which can afford a slashing and allocate more money to food.
Budgeting is pretty essential, in fact, I would say that it is the bare minimum when it comes to taking control of your finances.
Saving for Retirement
No one wants to keep working until the day they die, so it’s up to you how well you get to live it in the “golden years” of yours. The first step is, of course, to build up a significant retirement fund. Here’s another instance where automation is your friend!
If you already have a 401(k) or other employer-funded workplace plans, you can increase the percentage of investment up from the minimum of 3%, or even opt to match their contribution out of your own pocket. Did you know that according to Fidelity Investments, workers who become 401(k) millionaires contributed at least 15% to their workplace plan? So, it’s recommended to go as high as you can afford it!
Even if you do not have a 401(k), you can invest pretax income dollars into a traditional retirement account. A Roth IRA account is another option; where, although deposits need to be made with after-tax money, withdrawals are tax-free.
With investment being one of the top 5 goals of 2022, it’s clear that Americans are becoming smarter about making money and that’s a good thing to hear! With what little extra money they may have, they are opting to put it to good use instead of spending it on momentary pleasures.
However, while most people are keen to start investing, they may not know where to begin. While investing typically implies that you put the money somewhere so that it can grow, it can also mean that you do something meaningful with it. This could mean buying a car with cash (so you don’t have to deal with interest payments) or making a down payment on a home (which is a major financial and life accomplishment).
On the other hand, you could invest in the stock market by buying shares. The good news is that it is now easier than ever to do so with all the websites and apps that help you do so. The cherry on top of the cake is that you don’t need a massive amount to start investing – it’s up to you whether you invest $10 or $1000.
Whichever option you go for, make sure to do adequate research so that you are knowledgeable about what you’re going to do.