Make 2022 Your Best Financial Year Yet with These 8 Resolutions
The new year is an excellent time to take stock of your finances and resolve to make improvements. This month we’re offering eight suggestions for New Year’s resolutions to help you make 2022 your best financial year yet.
New Year’s Financial Resolution #1: Update and prioritize your financial goals
As life circumstances change, your goals should evolve. So, review last year’s goals and see if they still apply for this year. If you have new plans, you may need to adjust some goals, create new ones, and possibly drop some altogether.
Next, look at all your accounts (investments, savings, etc.) to see if they align with this year’s goals and make changes as necessary. Your goals and actions must align to achieve success.
Resolution #2: Make a plan to pay down your debts
If you want to get out of debt (and who doesn’t), it won’t happen by accident. You must create a plan and then execute it one step at a time.
One popular way to pay down debt is to list all debts and make the minimum payment on all except for the smallest. Put all extra money onto the smallest debt until it is paid off and then do the same to the next smallest, and so on.
You could also consider concentrating on paying off your most expensive debt first. This would be the debt with the highest interest rate. Once this is paid off, you’ll have even more money to apply to the next most expensive debt.
But whatever plan you create, be sure that it is realistic.
Resolution #3: Pay down credit card debt
This tip relates closely with Resolution #2, but credit card debt is especially dangerous because interest rates are often very high. Plus, if you carry a balance on one or more credit cards, getting out from under the debt can be challenging because interest compounds quickly, leaving your further and further in a financial hole.
First, resolve to stop using your credit cards except in case of an emergency (and, no, a triple latte is not an emergency no matter how caffeine-deprived you feel). If you do charge something, pay off the new right away.
Then work on paying down each credit card balance. As suggested in Resolution #2, one way to do this is to first concentrate on paying off the debt on the highest interest rate card.
Resolution #4: Review your credit report
While it’s a bad idea to have credit card debt, most likely you will need to borrow money to purchase a car or a home. Having a credit score of at least 670 helps ensure you can borrow money at an affordable rate when it’s time to make a major purchase. The better your credit score, the better the interest rate you can command.
So, review your report once a year to see your score. You are entitled to one free credit report each year from each of the three major credit reporting companies. Go to AnnualCreditReport.com to get yours.
Resolution #5: Review your retirement savings strategy
No matter if you want to spend retirement traveling or stick close to home and continue working part-time, it’s vital that you know how your investments are doing. You should also be making regular contributions.
If your employer offers a 401(k) match, be sure you are contributing enough to get the full match. If you’re already getting a full match from your employer, consider increasing the amount you contribute. Also, review your portfolio for diversity to lessen your risk should one of your investments take a tumble.
If you’re self-employed, retirement planning is just as important for you. You can invest in a 401(k), a Roth IRA, a Simplified Employee Pension (SEP), or a Savings Incentive Match Plan for Employees (SIMPLE IRA Plan). Allegiant’s team of wealth management advisors is here to help you determine the best vehicle for you.
Resolution #6: Add to your emergency fund
Traditionally, we advise setting aside three to six months of expenses in an emergency fund. Generally, this amount of easy-to-access cash is sufficient for most emergencies. However, the last couple of years has taught us to expect the unexpected. So, consider adding at least one month of expenses to your emergency fund for extra protection and peace of mind should an extended financial crisis occur.
Resolution #7: Expand your investment strategy
Consider expanding your investment strategy beyond your retirement account once you’ve taken full advantage of any employer 401(k) match. Investing outside your retirement account offers the opportunity to defer the tax benefits on investments you don’t sell, have immediate access to the funds you invest without penalty, and there is no limit to the amount you can invest.
Resolution #8: Review your insurance coverage
Is your home and auto insurance providing you the best coverage for the best price? It’s a good idea to shop your insurance needs around once a year by requesting quotes from several companies. And, if you don’t already, group all your insurance needs for reduced rates. You could save hundreds of dollars!
Allegiant Wealth Strategies, a wealth management and financial advising firm, serves Battle Creek, Kalamazoo, Portage, and Grand Rapids, Michigan. We look out for your best interest and discuss with you how to invest your money for a bright future.