As we come to the end of 2021, it’s wise to get a head start and begin thinking about how you can make 2022 as financially successful as possible. Although most people will wait until January to get everything in order, using the remaining weeks of the year can mean you’ve got everything set up to go when the bells ring for 2022.
In this article, we’ll explore five essential factors to consider when planning for 2022. By reviewing these factors, you’ll have a solid understanding of what you have to do and why – putting you on the path to financial success for next year and beyond!
Set Monthly and Yearly Goals
The first thing you should do when planning for 2022 is sit down and figure out precisely what you wish to achieve. This step will vary from person to person, but common goals include paying down debt levels, investing in yield-generating assets, buying a house, going on a big holiday, and more. Once you’ve noted down everything you’d like to achieve, you can then look at the calendar and ‘schedule’ these goals across the entire year.
The key in this step is not to be too overambitious, as arriving at the end of 2022 without accomplishing any of your goals would be disheartening! These goals should be based on your household income levels and any projected increases or decreases that may occur over the next year.
Review your 2021 Spending
Now that you’ve mapped out what you wish to achieve in 2022, it’s time to look backwards. This involves reviewing everything you spent across the last year and looking for trends and areas that you can improve on. Many banks and credit card providers now offer functionality to dig deep into the various expense types so that you can get an idea of where your money went.
You’ll likely begin to notice trends that could be altered in 2022, which would save you money. For example, we all love Starbucks now and then, but if you’re spending a significant portion of your income on coffee, then it might be time to rethink this and make your coffee at home! By picking out certain expenses that can be removed or lowered in 2022, you can help free up disposable income, which you can put to use elsewhere.
Create a Comprehensive Budget
Once you’ve set your goals and figured out your spending trends, it’s time for the fun part – budgeting! Budgeting can be a very fulfilling task, as the process of sitting down and planning out your weekly and monthly spending often highlights areas of your life that may need to be tweaked to meet your financial goals. The key with budgeting is to include not only ‘regular’ expense items, such as food and petrol but also ‘big ticket’ items that will accrue throughout the year.
These items may include going on holiday, buying birthday gifts, getting a new car, or anything else that would differentiate from the norm. By budgeting for these events in advance, you can ensure they aren’t out of the blue and don’t leave you in a precarious financial position after paying for them. We’d recommend using an application such as Excel or Google Sheets to create your budget, as these programs make it easy to alter the figures in real-time – as your income and expenses will likely change at some point throughout the year!
Consider Investing your Money
By creating a comprehensive budget, you’ll be able to estimate how much money you have leftover at the end of every month. Most people will be aware that yields from savings accounts are pretty low these days – and with inflation levels in certain countries hitting high levels, it can often mean that the spending power of your money will actually decrease by sitting in a bank account. Thus, it’s essential to consider investing your money to preserve this spending power.
The options you have for investing are vast and are too extensive to discuss within the scope of this article alone. However, aside from traditional index funds and equity portfolios, there are other options for retail investors these days. For example, at Lendermarket, we offer an array of consumer loans that can be invested in from the comfort of your own home. You’ll be able to handpick loans that suit your risk tolerance and investment goals, offering an avenue to generate a passive return over a timescale that fulfils your needs.
Have a Plan for the Worst-Case Scenario
Finally, as the famous saying goes, it’s a smart idea to ‘hope for the best but prepare for the worst’. You could have the best financial plan in the world, but it’ll be no use if some unanticipated event wreaks havoc on your goals. Furthermore, as the fallout from the COVID-19 pandemic has highlighted, there are certain things we cannot account for – but we can still have a plan in place for the unexpected.
The best thing you can do is think about what could potentially go wrong throughout the year – for example, you could be made redundant, or there could be another lockdown that contributes to decreased income. Once you have a list of potential events that could occur, you can begin to set a ‘backup plan’ in place for these events. An example would be losing your job – what financial support can you get from the government that could help tide you over? By thinking about these things, you can reduce their impact should they happen and keep you on track to meet your goals.
How to Plan Your Finances for 2022 – Final Thoughts
To summarise, 2022 is just around the corner, meaning now is a great time to begin thinking about how you can make next year as financially successful as possible. This year has likely been a rollercoaster for many people, with the constant upheaval caused by lockdowns and economic volatility. However, by putting your plan in place now, you can kickstart 2022 on the right foot – and optimise your financial situation for the months and years ahead.