How to Make 2022 Your Best Financial Year

Finance Tips

With the arrival of a new year comes a new opportunity to improve your financial situation. You can make 2022 your best financial year ever. Read that again. Yes, 2021 certainly was a turbulent year full of unexpected surprises. But regardless of what happened in 2021, you have what it takes to make 2022 your year. It’s an opportunity to make the most of what you have and take strides toward achieving your financial goals.

Planning is key in making financial success a reality.
Planning is key in making financial success a reality.

Evaluate your financial situation

As you plan to make 2022 your best financial year yet, you’ll want to start by reviewing and evaluating what you did in 2021 and how it impacted your current financial situation. As you review the previous year, ask yourself if you’re content with your financial situation, what you did well, and what you could have done better. By taking full account of your complete financial picture, you’ll be able to identify the strengths and weaknesses of your specific situation. This is a crucial first step to a financially successful 2022.

Plan (and act) ahead

Planning can go a long way in helping you have a great financial year. Time is incredibly valuable, and using it to your advantage will work in your favor. Getting off on the right foot, setting a plan (and sticking to it from day one) will set the standard for the rest of the year, giving you a full year to make good financial decisions.

Write everything down

What gets written gets done, and never has that rung truer than when it comes to financials. A written account of every euro you earn and spend will eliminate any doubts or inconsistencies. Documenting your income and expenses will give you the clarity you need to address and resolve the weaknesses in your financial situation.

Writing down your goals and keeping track of your progress will help you stay accountable.
Writing down your goals and keeping track of your progress will help you stay accountable.

Reduce your spending (if possible)

Benjamin Franklin famously said, “a penny saved is a penny earned.” Even if you’re not making any more money in 2022 than you were in 2021, reducing your spending can have the same impact as earning more. When you reduce your expenses, you can reallocate the money you’ve kept to savings or investing.

Prioritize your finances

Eliminate high-interest debt

A vital step to take in 2022 to have your best financial year is to set your priorities. Money always comes down to priorities, which sometimes means making a difficult decision, like deciding not to invest or save, but instead pay off high-interest debt.

Take some time to think carefully about the short and long-term effects of every financial decision you make. High-interest loan rates can climb into the double digits, making it extremely difficult to outperform with returns on investments. Hence, eliminating bad debt would, in most cases, yield a better net result than choosing to invest.

Start building an emergency savings fund

If you don’t have any debt, the next best thing to do is to build an emergency fund. In many cases, people end up taking out bad debt (i.e., high-interest-rate loans) to cover an emergency or unexpected expense. A savings account that can cover 3-6 months of living expenses can go a long way toward keeping your head above water while you build a sound financial future. You can read more about why you should have an emergency fund here.

Invest in any employer-matched or tax-advantaged accounts

Another priority should be taking advantage of any matches your employer offers or tax-advantaged retirement accounts. Investing in a brokerage account is always a good thing. Still, an employer match is essentially free money, and certain retirement accounts provide attractive tax benefits that can ease your tax burden now or during retirement.

Automate your savings

The best way to make sure you meet your savings goals is by automating your savings. Automated savings ensure you never forget to add money to your savings. You’ll also learn to live without that money, which will help you stick to your budget and live within or below your means.

Automating your savings will help you hit your savings goals and establish good habits.
Automating your savings will help you hit your savings goals and establish good habits.

Diversify your portfolio

Another great way to help make 2022 your best financial year is to diversify your portfolio. During the evaluation of your finances, you should weigh the holdings in your portfolio. Traditional investing advice suggests you divide your wealth into equities, fixed income, and cash, with the percentage allocated to equities being reduced as you approach retirement.

However, within your investment portfolio, it’s a good idea to diversify your exposure to different types of investments. If most of your investments are in large-cap, blue-chip stocks, consider diversifying by looking at smaller-cap funds or stocks, international equities, and emerging markets. You can also diversify by balancing investments across different sectors or by adding tangible assets like real estate or precious metals.

Speak to a professional

While fewer than 1 in 5 Europeans report having a financial advisor, a professional financial advisor can help you make 2022 your best financial year. Financial advisors make a living by helping people plan how to make the most of their financial situation, from risk management to investing and planning for retirement. A financial advisor can also help you make intelligent financial decisions and save you time to focus on yourself, increasing your income, and expanding your financial knowledge.

Start a side hustle

If, like most people, you depend solely on a single source of income to fund your lifestyle, starting a side hustle can help make 2022 your best financial year. A side hustle can be anything, from building your own business to working part-time for someone else. By adding a side hustle, you’ll not only make more money–you’ll also hedge your risks by moving away from depending entirely on your full-time job. In time, you might even find that your side hustle replaces your primary job.

Continue educating yourself

By working to make 2022 your best financial year, you will probably spend a lot of time learning about personal finance. The more you know about finance, the better informed you’ll be in every financial decision you make. As you continue to learn about new trends in finance and beef up your financial knowledge, you’ll be even better equipped to make sure you have a great financial year every year.

Share this article with someone you think deserves to live their best financial life in 2022.