A new year is an opportunity for a fresh start. From losing weight to starting a new hobby, there are a few resolutions that people frequently come back to again and again when determining what they want to change about their lives. Improved financial stability is another goal that we all seem to strive for consistently — but often fall short on.
Only 19% of Americans have enough cash saved to cover three to five months of living expenses in case of an emergency, for example. And although we’ve previously recommended three to six months’ worth of expenses on hand, we’re now encouraging 12 months since the pandemic has proven that your situation can change drastically at a moment’s notice. The point is, if you feel overwhelmed because you’re not in the best place financially, you aren’t alone.
The good news? 2022 offers many opportunities to improve your money management and attain greater stability and long-term financial health. The key to success is strategic planning informed by a fresh point of view. This new mindset starts with knowledge, from understanding your “money dial” — why you spend the way you do — to mastering networking and improving your money-making opportunities.
Taking the time now to learn the basics of money management will set you up for success in 2022 and beyond. This guide provides essential tips and practical insights on how to take advantage of the many new opportunities available to people financially, from freelancing to investing. Ready for a brighter and richer 2022? Let’s get started.
Benefits of money management on your life
At its most basic level, money can provide you with life’s essentials, like food and shelter, and can help you avoid the risk of having unmet needs. This can help safeguard against stress and anxiety, improve the odds of general contentment, and give you greater control over your life’s circumstances — another factor in determining happiness.
Beyond this, money can also help you experience life to the fullest, allowing for opportunities like travel. Financial stability further helps you achieve certain goals, like investing in yourself either through education or by improving your health. In these ways, money can create a sense of fulfillment and achievement, boosting your overall sense of well-being. We call this concept “living a Rich Life.” It’s not just about accumulating wealth, but using your money to do the things you’ve always wanted to do.
That doesn’t mean you have to be a multimillionaire. Good money management is an important life skill that can help you make the most of your income. Taking the time to educate yourself about the topic will benefit you in many ways. Here are some advantages of prioritizing money management:
- Get better control of your finances: Discovering that you’re running short of cash at the end of the month is never a fun feeling. With money management skills, you’ll have better oversight of expenses and spending, helping to improve control of your finances.
- Achieve financial goals: You likely have some big purchases you’d like to make that will require extra money, whether it’s a trip overseas or a new car. Improved money management will allow you to more efficiently and effectively save for these financial goals without feeling like you have to scrimp and lead a life of denial to get there.
- Improve your oversight of debts: Whether you have student loans or unpaid credit card bills, odds are you have some debt to your name. Sharpening your financial skills will allow you to take a smarter approach to debt by, for example, helping you to pinpoint which ones are best to pay off first.
- Prepare for the unexpected: Life can often throw a curveball when you least expect it. Whether your car needs repairs or it’s time for a new laptop, these unexpected expenses can be costly. Improved money management can help you save, ensuring you have an emergency fund when issues arise.
- Greater peace of mind: Money-related anxiety isn’t fun! A whopping 60% of people report feeling stressed when they think about their personal finances. Wouldn’t it be great to not cringe when you consider the sum in your checking account? Improved money management can help bring you that peace of mind by improving your general financial stability.
The benefits of improved money management are clear. Best of all, the key to getting there doesn’t have to cost a thing — it’s all about enhancing your knowledge and changing your behaviors accordingly. Read on for some actionable tips for improving your personal finances in 2022.
How to control your finances in 10 steps
Imagine how your life would change if you woke up tomorrow and:
- You knew exactly how much money you had
- Your bills were paid on time
- You invested your money for retirement automatically
- You had an extra $1,000 to spend or invest in whatever you wanted
- You had leftover income to spend on what you love — guilt-free
This isn’t just some pipe dream. You can have all this as long as you implemented the right mindset and systems, which we’ll teach you below.
10 tips to help manage your money in 2022
Modern money management is often focused on complex Excel sheets, strict budgets, and — above all — restrictions. Many of us are ingrained with the idea that, if we’re going to achieve financial stability, we need to lead a life of denial. This is also why many of us fail in money management — a life of constantly saying “no” to everything is, realistically, not sustainable.
So, what’s the answer? Comprehensive money management doesn’t just look at numbers in a spreadsheet. It also tackles the psychology that accompanies financial literacy. Some people are so stressed about their finances that they are simply afraid to tackle them, for example, while others shy away from the topic because it’s convoluted and confusing.
A clear-cut, holistic approach to money management can help. Here’s a quick, step-by-step guide to enhancing your financial literacy and improving your money management. By following these tips, you’ll gain a deeper understanding of how to best make your money work for you.
Start by understanding your current financial situation
Before you can overhaul your finances, you need to get a sense of your baseline. What assets do you have? What debts do you have? What are the interest rates and terms for those debts? Has your financial situation changed in any significant way recently (e.g., you’ve gotten married or divorced or have been left an inheritance)? Write it all down to get a clear overview of where you stand.
Examples of assets include real estate, pensions, stocks and bonds, savings accounts, retirement accounts, and tangible items like cars, boats, jewelry, computers, and furniture. Examples of debts include credit cards, vehicle loans, student loans, and mortgages. A clear overview will make it easier to create a spending plan and guide savvy financial decisions.
For example, let’s say you’re trying to decide whether you should pay off your student loans or invest. It will help to calculate the interest on your loans versus what return you can expect on a reliable investment. This also requires understanding what type of student loan you have and which investments you might pursue. Before you get into those details, you’ll need a basic understanding of your current finances.
Reconsider your preconceived beliefs about money
Although we don’t realize it, our lives are often controlled by invisible scripts — narratives we tell ourselves that influence the way we approach life’s opportunities and challenges. For example, an “invisible script” that has long dominated society (but is now being questioned) is that you have to get a college degree to be successful.
Most people also have invisible scripts about money ingrained in them — like the idea that investing is only for the top 1%. Such false narratives can help contribute to anxiety around money. Coupled with worries about a lack of cash, this can result in a general fear of money and dealing with it. The result? Zero financial planning. Identifying your false ideas about money is the first step in destroying them. Here’s how to start.
Instead of outlining a budget, consider “conscious spending”
Once you have a detailed overview of your current finances in hand — and you have identified some of those false narratives that are holding you back — you can start developing a new approach to money management. Start by drafting a bulletproof budget, which will help guide where your money goes. You can build a solid budget using four key categories: fixed costs, investments, savings, and guilt-free spending.
You might be surprised to see “guilt-free spending” as part of your monthly budget. This is part of the key to promoting conscious spending. In fact, you might want to nix the term “budget” and go with “conscious spending plan.” This is just as much a shift in mindset as it is a practical change. It’s about identifying expenditures that you enjoy while ditching those costs that don’t bring you joy.
Automate your finances where you can
Smart money management doesn’t have to mean keeping an eye on your finances all the time. Automation plays a critical role. Automating your finances — such as contributing to a savings plan or a 401(k) — helps prioritize those contributions without you having to think about them. You can also automate basic expenses like your rent and utility bills.
This then leaves you with the assurance that’s what is left after all that automation is for guilt-free spending. Technology can help with automation — for example, you may be able to set up monthly payments in online banking. There are also handy budgeting apps you can install on your mobile phone to track spending without having to constantly focus on the topic.
Cut out things you don’t need
The principle of “conscious spending” isn’t about encouraging overspending. Rather, it’s about focusing your spending on those things that truly enhance your quality of life. With the help of a budget app, you can get an idea of where you’re spending in your “guilt-free” category. Take a deep dive into those products and services. Which of them do you truly value? Which ones can you cut?
For example, let’s say you have subscriptions to Netflix, Hulu, and Amazon Prime. Do you actually use all three? Or maybe you tend to spend a lot of groceries — but then aren’t motivated to cook and let your produce spoil. What about getting easy-to-make meal prep kits delivered instead? Also, look into how you can reduce necessary costs like your cell phone bill. Do you really need all that data if you’re always on Wi-Fi?
Figure out ways to bring in additional income
Boosting your financial stability isn’t just about adjusting spending — you can also adjust how (and how much) you earn. Thanks to technology, there are more ways than ever to generate additional income. From turning a hobby into a way to generate cash to starting your own business as a side hustle or even making money as an artist — the opportunities are endless.
Your means of generating additional income can also be more mainstream. If you’re currently employed, is there wiggle room in your salary? Are you due for a step up the ladder? Check out these tips for asking for a promotion. Alternatively, if you’re not excited about your current role, maybe it’s time for a career switch. Identifying your dream job and mapping out a path to get there can also improve earnings.
Invest your money (if you aren’t already)
It’s important to save money so you have accessible liquidity in your bank account in case of emergencies. Having enough money to cover unexpected issues, from a new phone to a medical bill, is critical. However, you don’t want to push all of your extra money into savings. This is especially true at a time when interest rates are low, which remains the case as we enter 2022.
Investing allows you to set aside money so that it grows steadily, setting you up for a brighter financial future. Instead of leaving your extra cash stagnant in a savings account, it can increase over time. While you might not see great gains in the short term, this is a great way to prepare for retirement — and to keep up with external factors like inflation.
If you don’t have an investment strategy in place, this may be a daunting prospect. Don’t stress. Investing doesn’t have to mean you’re potentially gambling away your money on uncertainties. Look for reliable types of investments to start, such as contributing to a 401(k), opening a Roth IRA, and then opening a non-retirement investing account.
Here’s a short video that will walk you through how to get started.
Read more about personal finance
If you’re new to personal finance, one of the most important steps you’ll take is educating yourself about the topic. The great news is that there are loads of reliable educational tools available to you — many of them for free! I Will Teach You to Be Rich offers a slew of resources covering everything from careers to productivity to get you started. There is also a blog and a podcast you can check out.
This is just one of the many resources available to you. The point is: You don’t have to hire or pay a pricey financial adviser to manage your money. The internet has made information about smart financial management easier to access than ever. Take advantage of it and always keep expanding your knowledge. The financial field is constantly evolving and new opportunities are always arising. Try to stay up to date.
Revisit your financial situation regularly
Just as the financial field is always evolving, your personal financial situation is likewise going to change over time. The conscious spending plan you make at the start of 2022 may not make sense anymore by the second quarter. If your financial situation shifts in a practical way (e.g., you get divorced, get a promotion, or get an inheritance), revisit your spending plan.
Even if your financials don’t change substantially, your personal situation might, which means it’s still worth revisiting your money management plan. For example, if you used to spend a lot of time watching TV but have cut back, you might be able to save money every month on costs like Netflix, Prime, or another streaming service. As you evolve, your financial goals will likely evolve, as well. It’s good to be aware of it.
The most important aspect of money management: start now
Managing your money better isn’t about cutting out everything you love. In fact, you can still enjoy the things you love. It’s more about shifting your mindset and reviewing your cash flow to ensure that you’re balancing your guilt-free spending with savings. Changing your relationship with money may also require shaking off preconceived ideas about it. Getting your hands on the right educational tools is a good start toward debunking myths you’ve likely heard in the past.
You don’t just want to start saving. You also want to consider how to boost your income. Understanding your earnings potential is a good place to start (here’s a quick quiz to figure it out). We offer loads of resources to help you implement the steps above, from books to blogs. With these tools, you can get the knowledge needed to pave a path toward a brighter financial future in 2022.
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