How To Become Financially Healthy in 2022

Getting healthy in the new year comes in different forms. There’s physical health, mental health, and spiritual health that are the focus of many New Year’s resolutions. One form of health that should be assessed every year is your financial health. The beginning of the year is the perfect time to create a budget and make a few changes that will improve your financial situation throughout the year.

Creating a Budget

If you have never reviewed your financial situation, it may feel overwhelming.

1. The first step is to gather some information. You need to know how much money you bring home each month. You also need to know how much you pay for necessities each month. This includes electric, gas, and water bills, your rent or mortgage, phone bill, car payment, and insurances. These are the items that you must pay each month to have the necessities you require to function. You also need to have an idea of how much you spend on gas, groceries, television, subscriptions, and other items you pay for each month. These two items have the ability to be more flexible in your budget. Lastly, you need have information on any debt you carry. This could be student loans, credit card debt, or other loans. Once you have this informaiton handy, it’s time to create a budget.
2. The word budget is scary to some people. They see it as restrictive, like a diet. However, a budget is simply knowing where your money is going and how much. This is valueable information to have if you want to be financially healthy. To create a budget, list your bills (include what they are and how much they cost each month). Total the amount and compare it to your take-home income ( I use an excel sheet to easily update and total amounts). If the money you are spending each month is less than what you make, GREAT! If not, it’s okay. We are going to fix that.
3. By listing out how much you spend on specific items each month will help you see where your money is going. Ideally, no more that 50% of your take-home income should go to your bills, 20% should go into savings, and 30% for everything else. This doesn’t work for everyone but it is a good place to start. If you spend more than you make each month or would like to spend less and save more you can do that by cutting out the items that are not essential. You can start shopping sales and using coupons. Cut out subscriptions boxes or extra streaming services. One thing I did to cut costs was to get rid of cable and only use a streaming service. Having all of your monthly financial information in front of you will help you to see where you are over-spending and help you make decisions on how to save money.

If you have knocked your spending down to where you are making more than you spend, then it is time to start saving. Everyone should have an emergency fund of 3-6 months of your monthly costs. This way, if you lose your job, get sick or hurt, or a pandemic hits, you don’t have to panic. Next, you should start saving for long-term goals such as retirement. Talking to a financial advisor is a wise decision. They can tell you the best ways to make your money grow.

What about debt

It can be hard to save money when you have debt to worry about. A popular method of tackling debt is the snowball method. To use this method, you start by paying the minimum payment on all of your debt. Then, focusing on your smallest debt, pay off as much extra as you can until the debt is paid off. Then you can take that payment amount to tackle the next smallest debt. Eventually you will have a combined total of all your minimum payments to tackle your largest debt. This may seem like a simple concept but paying off debt is a challenge. You must be diligent in your goal to pay it off. It is incredibly easy to spend the money you should be using to pay down debt.

Ways to make your financial health goal easier

1. Use tools like Mint.com to keep track of your accounts and spending.
2. Get a part-time job. If you are able, this is the fastest way to make extra money. You can use this extra money to grow your wealth or to pay off debt. There are a lot of available part-time jobs, including remote jobs (check out Upwork.com) and jobs that you can pick and choose when you work (check out Ubereats, DoorDash, or GrubHub).
3. Stop impulse spending. Unsubscribe from retailers emails wanting you to buy from their latest sale (each week). Paying with cash only when you are out will help you to not overspend and stay on budget.
4. Not using a credit card is ideal but seems ubsurd these days. If you use a credit card, make sure you can pay it off in full each month. Credit cards makd it incredibly easy to go over your buget unintentionally. Keep a close eye on what you use it for.
5. Live on less than you make and stop looking at how others are spending their money. This can be hard with social media. Seeing others go on vacations and buying houses that in reality they can’t afford leads us to believe that we should be doing the same. I mean, they look so happy in their photos, right? Don’t believe the lie.

Make Financial Goals

Staying on a budget can be hard, especially if you don’t see a reward from using it. The best way to visibly see the benefit of a budget is to make financial goals and keep track of them. Your goal could be to build up your retirement fund, save for a vacation or something you would normally use a credit card for because you can’t afford it in the moment. Saving for something you really want is great motivation to handle your money more wisely. If you have debt then paying it off is a great goal. Remember, paying off debt means that the money you make stays in your pocket instead of going to pay off a purchase that has already lost its appeal.

Follow these tips for 2022 and you will start to see more money in your bank account. Remember that some benefits will happen more quickly than others. Set goals to help motivate you to stick with your budget. With a little discipline and healthier habits, you will be more prosperous this year and in the years to come.