Finance

Financial Goals to Set for 2022

If you want to make 2022 the year you fix your finances and accomplish your goals: Set your intentions, make a plan, and enjoy the small victories along the road. Read more in this article.

January 10, 2022

Financial Goals to Set for 2022

You would agree that one of the biggest trends for 2021, was trying to function normally while dealing with a two-year-old global pandemic.

We have now approached the third year — and the whole thing is starting to feel like something out of a movie — you might be wondering if it's time to re-add "personal financial organization" to your to-do list.

Of course, we support that! 

The new year represents starting fresh and building some positive habits to then continue throughout the next 12 months and hopefully, in perpetuity.  

In 2022, it is a good time to take stock and begin planning how you'll fit your goals into this new normal.

Here’s a breakdown of six things that could help you get back on track:

1. Create a Budget (that actually works for you)

Building a solid financial foundation starts with a budget.

A budget essentially shows you how much money you expect to bring in, as well as your mandatory expenses (like rent and insurance) and discretionary spending (like entertainment or eating out). Rather than seeing a budget as a hindrance, think of it as a tool for accomplishing your financial goals.

It starts not with a spreadsheet, but with an exploration of what’s important.

We often recommend the 50/30/20 rule. It’s a high-level, flexible budgeting framework that can help you control where your money’s going without having to count every penny.  (If you need some guidance, click here) You can now start making spending decisions that feel easier, more intentional, and more meaningful.

Snag your FREE Budget Template here.

2. Build a Cushion for Emergencies

Saving an emergency fund (kind of like working out) is something that might not feel great at the moment, but it’s about doing something good for your future self. Especially in times of job loss or if you become too ill to work.

Ask yourself this - would your emergency fund keep you afloat for six months to a year should you lose your job or become too ill to work?  Emergency funds provide a financial cushion that allows you to stay afloat in a crisis without relying on credit cards or high-interest loans. If you have debt, having an emergency fund can help you avoid borrowing more. (Win right there) 

How much should you save? 

This depends on your financial situation, but a good rule of thumb is to have enough money to cover three to six months' worth of living expenses. You can also be a little creative here, and think outside the box. As there is massive inflation as of the writing of this article, cash isn’t really a great thing to keep lying about. Alternative, albeit, riskier emergency funds could be large unused credit, home equity lines of credit, or reasonable margin loans. Remember, the sacrifices made to help you work towards your financial goals are not always fun, but think of the benefits, especially in times like these.

3. Max Out Your Roth IRA

The key to maxing out your IRA is to make it purposeful and contribute regularly. Whether it's to prepare for a comfortable retirement, to build generational wealth, to give your money time in the market, or to practice financial discipline, you'll want to be clear on why you're saving.

In 2022, the contribution limit for both traditional and Roth IRAs is $6,000. If that seems like a large sum, you can make a monthly contribution of $500 to reach the maximum – or whatever amount fits your budget.  Remember that you have until April 15, 2023 to contribute the maximum amount for 2022!

4. Cancel Unused or Unnecessary Subscriptions

Seeing the amount of money spent on unused subscriptions:

*Go easy on me*

We challenge you to count how many subscriptions you have. Not just streaming services - everything you pay for on a regular basis. We’re willing to bet you might miss one or two on the first try. The sheer number of directions our money goes means it’s easy to forget you signed up for a free trial until months after it’s started billing you. You can save money by determining which subscription services you wish to keep and which ones you would like to cancel by going through the various transactions.

This is your friendly reminder to cancel all unused subscriptions today.

5. Pay off your Credit Card Balance in Full Each Month

To minimize interest and lower your credit card costs balance over time, it's a good rule of thumb to pay off your credit card balances in full each month. If you don't pay off your credit card balance in full, a portion of each payment goes toward interest payments, lengthening the time it takes to pay it off.

Paying off your entire credit card bill can also help you improve your credit score by lowering your credit utilization ratio.

6. Build Your Credit Score

You can survive with bad credit, but it’s not always easy and definitely not cheap. Having a good credit score can help you save money and simplify your financial life.

Here are some great reasons why you *need* to have a good credit score:

  • Low interest rates on credit cards and loans
  • Better chance for credit card and loan approval
  • More negotiating power
  • Easier approval for rentals houses or apartments 
  • Better car insurance rates 
  • Get a cell phone contract with no security deposit

An example of why having a good credit score is so important:

Monthly payments on a $500,000 mortgage:

At a 4% fixed interest rate, your monthly mortgage payment on a 30-year mortgage might total $2,387.08 a month, while a 3% percent fixed interest rate might cost $2,108.02.per month. 

Your total interest on a $500,000 mortgage:

On a 30-year mortgage with a 4% fixed interest rate, you’ll pay $359,347.53 in interest over the life of your loan. That’s about two-thirds of what you borrowed in interest.  If you instead opt for a 30-year mortgage with a 3% fixed interest rate, you’ll pay $258,887.26 in interest over the life of your loan. If you qualify for the 3% vs. the 4%, that's a savings of $100,460.27. (This is one of the many reasons why having a credit score is so important.) If you want to make 2022 the year you fix your finances and accomplish your goals: Set your intentions, make a plan, and enjoy the small victories along the road.

We’re here to help you with all of that. Click here to get started.

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Vincere helps you live your ideal lifestyle by providing financial planning and investment advice that helps you pursue your passion and achieve a "Work Optional" Lifestyle.

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