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The new year will be here before you know it, which means now is the time to get your finances figured out. Regardless of how much you’re struggling financially, there are things you can do now to make 2022 easier. From automating your recurring bills to downloading a budgeting app, here are a few ways to start improving your financial situation:
1. Pull Your Credit Report
Have you reviewed your credit report recently? If it’s been over a year, go ahead and take a look. Your credit report plays a huge role in determining your credit score. And believe it or not, your credit report might have errors responsible for lowering your score.
When reviewing your report, there are a few things you should pay close attention to. For instance, look for an incorrect credit limit on one of your accounts, incorrect late payments, accounts listed multiple times, etc. While these errors might seem small, they can do a lot of damage. If you find any errors, contact the credit reporting company immediately.
2. Review Your Expenses
Reviewing your credit and debit card expenses is the first step in getting your finances under control. After all, how can you create a budget or cut costs when you don’t know how much you’re spending? Luckily, you don’t have to review your expenses yourself. In fact, you should consider integrating technology and have artificial intelligence handle the details.
There are many apps that’ll review your finances and create a budget for you to follow. And they all offer unique features depending on your goals. For instance, some apps are designed specifically to help couples create a budget. Other apps will categorize your expenses into needs and wants so you can see exactly how much you’re spending. Once you find an app you like, simply connect your checking and savings accounts and the app will do the rest.
3. Deal With Debt
You should put a plan in place now to help you deal with debt in 2022. One of the most effective ways to pay off debt is by following the snowball method. The snowball method advises you to start with paying down the smallest amounts first regardless of interest rate.
To get started, spend some time looking over your finances and listing out all of your debts. We recommend categorizing them from the smallest balance to the largest. While you should put money toward each account, contribute as much as you can toward the smallest balance. Once you’ve paid off your smallest amount, move on to the next one on your list.
The idea behind the snowball method is that you’ll feel better actually paying off debts starting with the lowest-hanging fruit. Do this instead of waiting until you’ve saved up a huge amount to pay off your debt. Many people try to contribute as much as they can at once to eliminate debt. Waiting too long to knock out smaller balances only increases the interest you’ll owe. Take care of those small debts first.
4. Automate Your Bills
Missing a payment, regardless of the amount, can drastically impact your finances. Not only can a missed payment lower your credit score, but you’ll also acquire interest. Meaning, you’ll end up owing more money than before you missed the payment.
The truth is, most people are aware of the impact, but they still forget to pay their bills on time. In 2019, NerdWallet surveyed over 2,000 U.S. adults and found that 35% simply forget to pay their bills.
To avoid this from happening, consider setting up automatic bill pay. For recurring bills like insurance, utilities, or car payments, go online and set up payments to be withdrawn automatically from your account. This way, you won’t have to remember when certain bills are due or run the risk of forgetting altogether.
5. Start an Emergency Fund
If there’s one thing we learned in 2020, it’s that anything can happen. And even as 2022 gets ready to start, many of us are still dealing with the financial impact of the pandemic. If only we had planned for the unexpected. Well, it’s never too late.
Make a plan to start building an emergency fund in the new year. This way, you’ll have money in the event you lose your job, need to repair your vehicle, or face unexpected health problems.
Starting an emergency fund doesn’t have to be difficult. You don’t have to put away large contributions, especially if you don’t have the finances to do so. Putting away a small amount, like $10 a month, can add up so you can handle the unexpected.
6. Create a Holiday Budget
The holidays may be in full swing now, but that doesn’t mean you shouldn’t plan ahead for the holidays in 2022. Holidays tend to be a big spending time for many people so it’s never too early for planning. While you might feel inclined to purchase new decorations and treat your friends and family members to expensive gifts, be careful. You don’t want the holidays to make you go broke in the new year.
Instead of spending frivolously, create a budget for yourself to ensure you don’t overspend this holiday season. To create a holiday budget, start by looking at how much you spent last year and reflect on the impact of that spending. Did spending that amount of money make it difficult to pay your bills? Were you able to quickly repay those bills? Have your finances changed since last year?
Based on the answers to those questions, create a holiday budget that’ll keep you in check. The last thing you want to do is start the new year off with debt you’ll struggle to get rid of.
While improving your finances can be a daunting task, it’s possible. Start small and be patient. Then you’ll start to see a difference in your wallet in the new year.
