One constant financial term that comes with every new year is financial planning/personal finance. A Global Consumer Survey conducted in Nigeria by Statista in 2021 showed only 48% of the respondents were informed about their financial situation. In 2020, the lack of financial literacy cost Americans $415 billion, with only 40% having less than $300 one savings. In this article, we discuss personal finance and six ways to plan your finances in 2022.
6 ways to plan your personal finance in 2022
Personal finance is simply managing your money as well as saving and investing. It covers areas that include banking, budgeting, insurance, investment and retirement plans. Here are six ways to plan your finances in 2022:
Create and Stick to a Budget
The first step to making healthy financial decisions is creating a working budget and sticking to it. The most common and recommended format is the 50/30/20 budgeting method. Let’s break it down:
- After-tax, 50%of your net income should go into living essentials that include rent, groceries and transportation.
- 30% goes to miscellaneous expenses such as shopping, luxuries and charities.
- 20% of this divide goes into savings. This can also include repaying your debts and also an emergency fund.
Reduce Debts
My second method would have been “do away with debts”, but in some cases, this is not possible. Certain situations require borrowing or taking bank loans but you just have to limit them. One way to do this is not to spend more than you earn.
Plan and Save for Retirement
The single mistake most people make when they hear the above is thinking retirement is a lifetime away. You might have 30 more years before retirement but saving early leads to compounded interest. And more money for your after retirement life. It also reduces your current income taxes when you save in either an individual retirement account (IRA), a 401(k) or a 403(k).
Review your Investments
You must review your investment portfolio regularly to assess the state of your assets, stock and cash flow. This end of the year investment portfolio review allows you to list all your investments and monitor individual allocations.
Take Occasional Breaks
Yes, you need to be strict with planning your finances, but at the same time, you have to take breaks. The whole budgeting process at times comes with certain restrictions. Going on a yearly vacation, a desired purchase, or a fun date with your family and friends can give you a taste of the financial freedom you’re planning towards.
We’ve talked about personal finance and how you can plan your finances in 2022. However, in some cases, you need the help of a financial advisor or other financial experts. To improve your knowledge, you can take online classes on personal finance like EdX. Also read blogs and listen to podcasts like “The Dave Ramsey Show” and “Planet Money”. Look for resources that fit your financial lifestyle and keep refining, ng your financial skills.