There is no denying that a new year is synonymous with a fresh start for many people. Therefore, it isn’t uncommon for individuals to make several New Year’s resolutions about their health, career, family life, and even personal finances. Indeed, a survey of more than 2,000 Brits commissioned by GoCompare revealed that 24% of UK adults planned to sort out their finances and reduce spending in 2021.
It is an excellent time to start thinking about your finances as the sun sets on 2021 and another New Year is around the corner. Here are six goals you should set to stay on top of your finances in 2022.
Pay Down Your Debt
You must commit to paying down your debt in 2022 to enjoy a better financial future. Credit card debt is a popular form of debt you are likely carrying, with data indicating that the average credit card debt per UK household was £2,133. Paying down this debt as quickly as possible can lower the overall interest you have to pay and alleviate stress and anxiety. It can also boost your credit score so you can qualify for loans with better terms more easily. Medical debts, personal loans, student loans, and outstanding tax payments are other types of debts you should work towards paying off.
Open Extra Income Streams
Tom Corley, the author of “Rich Habits”, studied the habits of millionaires for five years. His research revealed that 65% of millionaires had three income streams. Consequently, prioritise opening additional income streams to earn more and boost your overall financial health. Multiple income streams ensure that you don’t rely on your job as your only source of money. Therefore, you can build these streams to earn against sudden job loss. Thankfully, there is no shortage of ideas you can explore to earn extra income in today’s world. For instance, freelance work is one of the best ways to earn money outside your regular job. Therefore, you can try graphic design, copywriting, data entry, or photography in your free time. Additionally, consider investing in real estate, starting an online course, affiliate marketing, and peer-to-peer lending to diversify your income stream.
Better Financial Documents Organization
Financial documents are key to your personal finance, so it is vital to keep them safe. Over time, everyone accumulates several financial documents, both paper and electronic. Consequently, set a goal to gather and organize them to stay on top of your finances. You can break this goal down into tasks like categorizing your financial papers and saving the vital ones like tax returns, retirement and investment statements, insurance policies, mortgage documents, and warranties in a safe location. Also, always open bills as soon as they arrive and review your credit card and bank statements monthly.
Create or Update Your Budget
Living according to a budget is an excellent financial goal to set for yourself in 2022 if you are not using one already. Numerous experts agree that budgeting truly is one of the financial habits that pay off in the long run. It ensures that you have money to cover what you need now and meet savings goals. Budgets also help track your spending because they force you to take a closer look at how you use your money. As such, you can readily notice when you are spending money on unnecessary things and rethink your choices to use your money better. Sticking to this budget can also help you prepare for emergencies, defray your debts, and remain focused on other long-term goals.
Build an Emergency Fund
An ING International Survey of 15 countries revealed that over one in four UK Households have no emergency savings. However, an emergency fund is vital, so building yours is a financial goal to set for a new year if you don’t already have one. The COVID-19 pandemic has highlighted how important this fund is in case you lose your job or have to cover an unexpected large expense. You can set aside three to six months’ worth of your salary to cover your living expenses for these periods if the unthinkable happens, so keep this in mind.
Set Up a Savings Goal
It is an excellent idea to set up some savings goals once you live on a budget. These goals can be as many as you want and customized to suit your specific needs. For example, you can set a goal to save for your vacation if you plan on taking one soon. Similarly, you can save for your retirement or children’s college tuition if these are more important to you. However, all your goals must be specific, measurable, achievable, relevant, and time-bound to ensure that you can realistically accomplish them.