Skip to main content

6 easy steps to better manage finances in 2022

6 easy steps to better manage finances in 2022
(Image credit: Getty)

Working out how to better manage finances can be difficult at the best of times, and the challenges that COVID has thrown up has only made it harder. However, with a little guidance, some hard work, and perhaps a slight turnaround in fortunes, 2022 represents the ideal opportunity for a fresh start in how you manage your finances going forward. The onus is on you to take control, but you shouldn’t feel daunted, and with the help of the following tips, you can quickly put yourself into a far better financial position for 2022. 

Work out what you have

Establishing how your finances currently stack up is vital for anyone hoping to better manage finances going forward. So write down all the various money and assets that you have to your name, including funds held in checking and savings accounts, any retirement savings and IRA’s, and the value of any vehicles that you own. If you have investments, use your online stock trading platform to find out the latest value, and if you’re buying your house, talk to your mortgage lender to work out how much equity you have stored up in your home. 

Next, you need to note down all of your debt, including what you owe on student loans, your mortgage if you have one, auto loans, credit cards, and personal loans. And then you simply take what you have in debt away from what you own, to give you an overall idea of your net worth. If it’s the first time you’ve done this, a pen and paper, and maybe a calculator, should do just fine, or a basic spreadsheet. Or even better, the best personal finance software is designed precisely to make this kind of exercise as easy as possible. If what you own exceeds what you owe, then you’re in a decent place, but if it’s the other way round, you know there’s work to be done. And that’s where the next exercise is vital too. 

Income vs expenditure 

If you want to improve your overall financial standing, you’ll need to work out how your income compares with your outgoings. This means listing all the money you receive each month from your employment, bonuses, benefits, and side hustles. It can also include the interest you receive on savings and the dividends you’re paid from any investments you might have. 

Of course, you then need to write down all your regular expenses, starting with those that are fixed, such as payments for your mortgage, rent, student loan, auto loan, and any personal loans you might have. If you pay your auto insurance monthly rather than as a lump sum, note those payments down too, along with health insurance premiums, and so on. Then think about all the expenses that usually alter from month to month, such as groceries, utility bills, and gas for your vehicle, and make an educated guess over the average amount you’d spend on these in a typical month. 

6 easy steps to better manage finances in 2022: Image showing woman sat at kitchen table with laptop and paperwork

(Image credit: Getty)

Do you have a surplus or overspend?

Taking away your total expenditure from your income will tell you one of two things. If your outgoings are less than what you have coming in, you have the potential to save money each month. The best online banks are where to look to put money away but retain easy access to your funds, or if you’ve got some savings already, perhaps you could invest for the chance of a greater return. 

Of course, if you’re spending more than what you’ve got coming in, it means you’re edging further into debt with each passing month. You really need to address the situation right now, but fortunately, you now have everything listed to try and identify where you might be able to cut back. Avoiding the coffee shop on the way to work and assessing what you spend on TV streaming services and your cell phone plan are often good places to start. Millions of home buyers could also save hundreds of dollars a month on their mortgage payments by taking advantage of low rate deals. 

Whether you’re looking for the best coffee makers so you can still have your early morning caffeine hit, or considering the best refinance mortgage companies, always shop around if you possibly can, to make sure you’re getting the very best deal. 

Set up an emergency fund

If you do have money available to save each month, building up an emergency fund - if you haven’t already got one - should be another new year priority. Recent research found that having just $100 in savings can prove crucial in avoiding turning to high-cost borrowing such as payday loans if you encounter financial difficulties, so everyone should try to get some money put aside. 

Ideally, an emergency fund will be large enough to cover between three and six months’ worth of expenses, so you know that your bills will be covered for a decent amount of time should you lose your job, or get ill. But the more you can save, the better, as it’s always good to be prepared. And if you can’t afford to put anything away out of your usual income, maybe consider allocating a proportion of any potential tax refund or stimulus check 2 for such a purpose.

6 easy steps to better manage finances in 2021: Image showing fingers walking up stacks of brightly lit coins

(Image credit: Getty)

Check your credit score

Finding out your credit score can prove pivotal in improving anyone’s financial future. That’s because your credit rating is what lenders look at when deciding whether they want to lend to you, and on what terms. The best credit card and personal loan rates are always reserved for those with the best credit standing, as are the most favorable mortgage rates and terms.

If your credit score is under par, there are ways in which you can look to address the situation yourself, or you can turn to the best credit repair services for help. But with a good credit rating having the potential to save you hundreds of thousands of dollars on loan and mortgage payments over the course of a lifetime of borrowing, whichever path you take will be worth doing. 

Tackle your debt

If you’re in debt, and falling deeper into the red, try to use 2021 as your starting point for getting yourself out of it. In the first instance, you’ll need to use your income vs expenditure calculation to see where you might be able to cut back on spending. Then paying back what you owe should be the next aim. If you’ve got credit card debt, consider switching to a 0% balance transfer card so you can make inroads without incurring any more interest, and try to pay back more than the minimum each month. If you owe in a few different places, work out which debt you should pay off first

And if you’re starting to feel concerned or overwhelmed about your debt, it’s always best to seek help. Speak to loved ones for help and advice, or talk to a debt counselor, and if all else fails, perhaps contact the best debt consolidation companies to see what options they can provide. But whatever you do, never simply let the problem of debt slide without taking some kind of action - tackle the issue head on and you could enter 2022 in a far better financial frame of mind. 

With over 20 years’ experience in the financial services industry, Tim has spent most of his career working for a financial data firm, where he was Online Editor of the consumer-facing Moneyfacts site, and regularly penned articles for the financial advice publication Investment Life and Pensions Moneyfacts. As a result, he has an excellent knowledge of almost areas of personal finance and, in particular, the retirement, investment, protection, mortgage and savings sectors.