5 steps to take with your money in 2022 – Bankrate.com | Vette Leader

At a time when inflation is at a 40-year high and the prices of everything from gas and groceries to furniture and cars are skyrocketing, many consumers are focused on how to do better with their money to be able to deal with. Developing practical strategies for saving, spending, and investing can help you build an emergency fund, reduce debt, and find peace of mind.

Bankrate asked personal finance experts from across the country for advice on how to make this year and the years to come more financially fruitful.

Manage your finances after COVID-19

Many U.S. consumers have poured more money into savings during the COVID-19 pandemic, fueled by government stimulus payments and a drop in spending on things like travel, transportation and eating out. Many used the extra money to pay off debts as well.

The US personal savings rate, the percentage of consumer income that is invested in savings after taxes and living expenses, more than doubled in 2020, according to the US Bureau of Economic Analysis. The personal savings rate fell slightly to 12.2 percent in 2021, returning to pre-pandemic levels averaging 6.2 percent in the first two months of 2022.

If you’ve been saving more during the pandemic, consider maintaining that habit to further increase your savings for emergencies, retirement, and other financial goals.

5 money moves for 2022

  1. Create a budget
  2. Think about the expenses
  3. Start investing with a small amount
  4. Take a second look at cryptocurrencies
  5. Think beyond next year

Although some aspects of your personal finances may change – such as Whether it’s where you have your bank account or what stocks you invest in, there’s one part of your personal financial strategy that stays constant: you need a budget.

A budget may involve tracking your expenses each month, including line items earmarked for things like savings and paying off debt. A budget should be flexible as expenses change over time. A common budgeting approach is the 50/30/20 rule, which allocates 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 a close eye on your finances with a budget,” says David Sterman, CFP, President and CEO of New Paltz, Huguenot based in New York Financial Planning. “For people familiar with spreadsheets, this is often the best approach, although there are also many useful budgeting apps you can download.”

Many consumers worry that budgeting will uncover reasons to feel bad about their money management, but ultimately the process can help you make informed financial decisions and save more money.

“A lot of people feel like focusing on their budget makes them feel guilty about what they’re spending, but that’s not usually the result,” says Sterman. “Instead, people develop a sense of empowerment when they see how their spending relates to their income. And by creating a budget, you’ll have a better sense of how much you can spend each year on voluntary items like contributions to an investment account, a new car, or that long-awaited big trip.”

Look at your expenses and determine which ones can be reduced or eliminated. Areas where consumers tend to spend more than necessary include:

meal: According to the US Bureau of Labor Statistics, a third of the average household’s grocery budget was spent on eating out in 2020. Preparing more of your meals at home can save you a lot of money compared to eating out in restaurants or picking up takeout.

If a busy work schedule keeps you from cooking during the weekdays, prepare some meals ahead of time on the weekends. Cooking at home can not only save you money but also contribute to a healthier diet, according to research.

insurance: Your insurance premiums may increase to keep up with inflation. So it pays to shop around to make sure you’re getting the best rates for your home and car insurance. You can also save money by bundling insurance products with the same provider.

mobile service: Check your cell phone plan to see if you’re paying for data or services you don’t need. If you’re looking to switch providers, smaller companies like Mint Mobile, Ting, and Tello might be cheaper than the big ones. Another way to cut costs can be with a prepaid phone plan.

subscriptions: You may be paying for magazine subscriptions, streaming services, and gym memberships that you no longer use or need.

“A lot of things are subscription-based these days, but sometimes life gets in the way and we forget to cancel the things we don’t use,” said Elizabeth Buffardi, CFP, founder of Oak Brook-based Crescendo Financial Planners. Illinois. “By canceling things you no longer want or use, you free up money for things you truly enjoy.”

If you already have savings for emergencies, you should consider investing in the financial markets. While it can be risky, it’s possible for this type of investment to beat inflation, build wealth, and save for goals like retirement.

Ways people start investing typically include:

  • 401(k) plans: Many employers offer this type of retirement plan and match your contributions up to a certain percentage – essentially giving you free money. Plus, the money grows tax-free until withdrawn. Bankrate’s 401(k) calculator can help you predict how much you’ve saved over time.
  • S&P500: This conglomeration of about 500 large, publicly traded US companies has often yielded returns of about 10 percent annually. A fund based on this collection of stocks is relatively easy to buy, requires little monitoring, and often has a low expense ratio.
  • Investment 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 an easy way to diversify your portfolio and may require a relatively small minimum investment.

“You don’t have to have paid $1 million or all your bills,” says Andrew Feldman, CFP, president of Chicago-based AJ Feldman Financial. “Start with a small amount and be proactive. If you already have a plan, be proactive. Make sure you have checked recently and are properly allocated with all the market movements.”

Cryptocurrency is a form of currency that exists solely in digital form and is managed without a central bank. Today there are thousands of types of cryptocurrencies, some of the most popular of which include Bitcoin, Ethereum and Dogecoin.

Cryptocurrency is appealing to some investors for its potential for high returns, as well as its decentralized nature – which some investors believe can help protect against inflation.

The downsides of cryptocurrency include extreme volatility, and unlike many other investments, it is not backed by assets or cash flow. Therefore, it is important that cryptocurrency is added to a diversified portfolio.

“When investing in cryptocurrency, keep the allocation to a small portion of your portfolio as it is very risky,” said James Royal, principal investigator and wealth management reporter at Bankrate. “If cryptocurrency is the next big thing, you don’t need a lot to generate attractive returns, and if not, then your overall portfolio won’t be hurt all that much.”

“Cryptocurrency volatility is expected to continue,” says Royal, thanks to the Federal Reserve raising interest rates and pulling liquidity from financial markets in 2022, as well as President Biden’s executive order to probe cryptocurrency regulation.

Creating a financial plan can help you achieve your financial goals for 2022 and beyond. Creating a financial plan involves calculating your net worth, income, and expenses, and devising a savings strategy to reach your goals.

Instead of just planning to save money, set financial goals such as: For example, buying a house, taking a dream vacation, funding your children’s education, or saving a set amount for retirement. Setting goals like these can help motivate you to save and keep you on track.

When it comes to financial life planning, Sheila Padden, CFP, founder of Chicago-based Padden Financial Planning, asks her clients some key questions.

“If you have enough money, how would you live your life?” Padden says. “Would you change something? If you only have five to ten years to live, what would you do with the rest of your life? would you change something

“If you suddenly find out you have one more day to live, what have you missed? What didn’t you do? who have you not become?”

Padden says the questions are often the catalyst for “clarity and purposeful action.”

When you need to find your purpose, you may first need to find a way to overcome feeling overwhelmed. Check out Bankrate’s guide to coping with financial stress.

–Freelance writer David McMillin contributed to a previous version of this article.

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