Create a budget
A budget can involve mapping out your spending each month, including line items earmarked for things like savings and debt repayment. A budget should be flexible, as expenses change over time. A common budgeting approach is the 50/30/20 rule, which devotes 50 percent of your income to needs, 30 percent to wants, and 20 percent to savings.
It’s so easy to fly blind when it comes to your income and expenses, but it’s so important to keep close track of your finances with a budget.
For those who are comfortable using spreadsheets, that is often the best approach, though there are also many useful budgeting apps you can download.
By creating a budget, you’ll have a better sense of how much you can spend each year on discretionary items such as contributions to an investment account, a new car or awaited big trip.
Be mindful of expenses
Look through your expenses and determine which ones can be reduced or eliminated.
If a busy work schedule keeps you from cooking during the week, prepare some meals in advance over the weekend. Not only can cooking at home save you money, but it can also contribute to a healthier diet, research suggests.
Insurance: Your insurance rates may be rising to keep pace with inflation, so it pays to shop around to ensure you’re getting the best rates on your home and auto insurance.
Mobile service: Review your cell phone plan to determine if you’re paying for data or services you don’t need. Another way of reducing costs can be going with a prepaid phone plan.
Subscriptions: You may be paying for subscriptions for magazines, streaming services, and gym memberships that you no longer use or need.
Start investing with a small amount
If you already have emergency savings, consider investing in the financial markets. While it can be risky, it’s possible for this type of investing to outpace inflation, build wealth and save for goals like retirement.
Ways people get started with investing commonly include:
401(k) plans: Many employers offer this type of retirement plan and will match your contributions up to a certain percentage — essentially providing you with free money. What’s more, the money grows on a tax-free basis until it’s withdrawn. Bankrate’s 401(k) calculator can help you predict how much you’ll have saved over time.
S&P 500: This collection of 500 large, publicly traded U.S. companies has often brought in returns of about 10 percent annually. A fund that’s based on this collection of stocks is relatively easy to purchase, requires little monitoring, and often has a low expense ratio.
Mutual funds: A mutual fund pools money from many investors to invest in a collection of stocks, bonds, and money market funds. These professionally managed funds can be a simple way to diversify your portfolio and may require a relatively low minimum investment.
Start with a small amount, and be proactive. If you already have a plan, be proactive.
Make sure you have reviewed it recently and with all of the market movement are you allocated properly.
Take a second look at cryptocurrencies
Cryptocurrency is a form of currency that exists solely in digital form and is managed without a central bank. Today, thousands of types of cryptocurrencies exist, some of the most popular ones being Bitcoin, Ethereum, and Dogecoin.
Cryptocurrency appeals to some investors for its potential for large returns, as well as its decentralized nature — which some investors believe can help protect them from inflation.
The downsides of cryptocurrency include extreme volatility, and unlike many other investments, it’s backed by neither assets nor cash flow. As such, it’s important that cryptocurrency be added to a portfolio that’s diversified.
Think beyond next year
Building a financial plan can help you reach your money goals for 2022 and beyond. Creating a financial plan involves calculating your net worth, income, and expenses, and mapping out a savings strategy to reach your goals.
Rather than just planning to save money, set financial goals such as buying a house, taking a dream vacation, funding your children’s education, or having a set amount of funds saved by retirement.
Setting goals such as these can help motivate you to save and keep you on track.
If you have enough money, how would you live your life?