5 New Years Resolutions to Boost Your Financial Health in 2022
Each year, many of us vow to get into better financial shape, making resolutions to save more, spend less and grow our income.
However, in the wake of the pandemic, these resolutions have become even more important, as many suffered the financial ramifications of job losses, closed businesses, and increased childcare costs.
With this in mind, as the world begins to return to normal, here are 5 New Year’s Resolutions you can implement to get your financial health back on track in 2022.
Make a plan to cut your expenses.
To start with, you should take a long, hard look at where your money goes each month – your outgoing transactions recorded on your bank statement are a good place to start.
Chances are, you’ll have recurring subscriptions for things you don’t need. How about the Amazon Prime membership you only use every few months, or the gym membership you bought last January but use only once in a blue moon (despite callisthenics being free)?
These may not account for much on a one-off basis, but these expenses can add up throughout the year.
Moreover, you’re sure to be aware of some corners you can cut to reduce your expenses throughout the year.
For example, why not vow to steer clear of big-name brands when completing your weekly food shop? Or, walk or cycle when you don’t need to drive somewhere, to save on petrol?
Come up with – and stick to – a savings plan.
Whether you’re saving for something specific, like your child’s education or for the deposit on a house, or even if you want to have a wad of cash to fall back on should unexpected expenses fall into your lap, coming up with – and sticking with – a savings plan will top many people’s New Years Resolutions list this year.
When creating your savings plan, there are a few rules of thumb to follow.
One: decide how much you’re going to save each month, depending on your financial goals. It’s recommended that you save around 20% of your income each month, though you can be more ambitious if you have a pressing financial deadline, such as wanting to buy a house in the next year.
Two: don’t be unrealistic. Most people aren’t able to save half of their income each month, and aiming to do so will probably make you throw away your savings plans altogether, leaving you worse off than if you just sought to save a little each month consistently.
Three: pay yourself first. After taking into account the costs for essentials – such as rent, groceries and utilities – deposit the pre-determined amount you want to save into a savings account, so you’re better able to see how much you’re working with throughout the month when making non-essential purchasing decisions.
Investing is the best way to grow your earnings without working extra hours at the office.
If you haven’t started investing already, then start – do your research and come up with an investment plan that considers your risk tolerance, long-term goals, and the market conditions.
However, for those who have already begun to invest, the new year is the perfect time to re-balance your investment portfolio, as you might find that – as a result of some sectors and assets outperforming others – your asset allocations are out of whack.
Pay off debt.
Being in debt is one of the biggest (if not the biggest) stresses we can endure financially – and the less of it we have, the better.
For this reason, paying off debt should be on your list of financial resolutions for 2022, whether that means paying off a credit card, overpaying your mortgage or paying back a student loan.
When choosing what to pay off first, you should probably prioritise your highest interest debts – such as payday loans or credit card debt – as these quickly climb over time and can cause severe financial issues if left untouched.
Improve your credit score.
When it comes to borrowing money for anything – whether that’s a mortgage, to enable you to buy a house or a loan to start a new business – you need to have a good credit score to do so.
How to improve your credit score, there are a couple of things you can do.
First, you should be aware of your score, which you can find online for free via numerous credit report companies. Then, you should check that there aren’t any mistakes that are bringing your score down (and take action to have these corrected if there are).
An easy way to improve your credit score is to use your credit card to make payments each month and pay those payments off on time and is one of the best ways to prove you can pay off debt reliably, which will be reflected in your credit score.
You can also have your rental payments recorded on your credit record, which isn’t done automatically – causing problems for many former renters who want to borrow – and can be achieved with the help of a service such as CreditLadder.