5 Simple Financial Goals You Should Have For 2022
All of these goals are simple to implement right away
So let’s talk about the 5 most important financial goals for 2022 that I think you should be paying attention to.
Most New Year’s resolutions fail because we get excited and motivated, but we don’t have the discipline to actually see those goals through.
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In this article, I’ll discuss 5 goals that are simple to implement and I’ll talk about why these goals help.
Create an emergency fund
The most important financial goal for 2022 should be to have an emergency fund. You might think that this is common knowledge and perhaps you’ve already learned about this a long time ago.
Everyone knows that you should have an emergency fund, right?
Well, let’s see why this is so important. In a way, I like to view this emergency fund as my personal insurance policy against life. We all know that life happens.
You could be dealing with an unexpected medical bill, car repair or maybe you lose your job.
The reason people have emergency funds is so they can sleep peacefully at night.
As a rule of thumb, an emergency fund should be anywhere from 3 to 12 months of living expenses, depending on your life situation. If you’re single and don’t have anyone depending on you, 3 months is usually fine.
If you have a life partner or a significant other, you should probably have an emergency fund for around 5 months. If you have people that depend on you, then your emergency fund should cover at least 6 months of living expenses.
This is the fun part. Why is this important? You’re going to lose purchasing power due to inflation and interest rates for the foreseeable future. You have to understand that if you’re not investing, you’re literally losing money through inflation.
Investing can help you preserve your wealth and increase your purchasing power, or at least maintain it over time.
401(k). If your employer matches your 401(k), that’s great news for you because that’s essentially free money with the portion that they match. Contributing up to that amount is probably a good idea most of the time.
Roth IRA. I believe that fully funding a Roth IRA is a great idea as well. This is using after-tax money, which means that you can even take out the principal before 59 and a half and also for special use cases like buying a first home.
Create a taxable investing account.
Invest in real estate. There are many different ways you can invest in real estate. For example, you could buy an investment property, or you could crowdfund different projects. This is typically a way to preserve your wealth and lots of rich people usually invest in this.
Precious metals. This is usually a hedge against inflation. Gold and silver fall into this category.
Automate your savings
Let’s face it, paying yourself first is the easiest way to save money. You don’t even have to think about it.
The money goes into your savings without you being able to spend it and you’re paying yourself first before all your bills and before having the chance to waste it on things that aren’t important.
I chose to automate my savings, and I have my account set up in a way that helps me automatically contribute to my emergency fund, investment fund, and entertainment fund.
I take 20% of my monthly earnings from my checking account and have it automatically transferred to my savings account.
This helps me save 20% of my income without me even knowing it.
Pay off high-interest debt
It’s always smart to pay off high-interest debt. On the other hand, paying off a low-interest rate doesn’t really make sense right now in our current environment.
When you pay off your debt, you’re making a risk-free, guaranteed rate of return. You don’t have to pay taxes on this either.
So what is considered high-interest rate debt? If the interest rate for your debt is 5% or higher, it makes sense to pay that off first, even before you start investing.
So let’s say that you have a credit card with an interest rate of 12%. By paying off that debt, you’re making a guaranteed risk-free rate of return.
On the other hand, if you have a 30-year fixed-rate mortgage and your interest is 2.5%, you can probably beat that easily in the market by investing in something that makes you 9–10%.
In this case, it makes sense to take the money and make the minimum payment on your mortgage before investing the difference.
We currently live in an inflationary monetary system. This means that inflation is typically 2–3% per year. This year is obviously an example because inflation is going through the roof right now.
When you’re paying off 2020 debt this year, you’re doing so with inflated dollars from the future. This essentially means that your purchase is now less expensive.
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Photo by Tim Mossholder on Unsplash
I believe that it really depends on where you are on your financial education journey. You might be just starting out, and that’s totally fine. Or maybe you’re already pretty advanced.
No matter where you are on your journey, remember that you should always try to improve and learn more.
One of the first books about financial education that I’ve read is Rich Dad, Poor Dad. This is typically the book that everyone out there will recommend when you’re just starting out.
I believe that this is an excellent book because it gets you in the mindset of understanding assets versus liabilities.
You have to understand something pretty basic. On one hand, assets bring income into your life every month, while liabilities take money from you.
I also encourage you to start listening to the Bigger Pockets podcast. I’ve learned a lot from their podcast, although I see it as a more advanced tool.
Last but not least, remember that you should also invest in yourself.
You can only save your money so much before you get to a point where you’re no longer enjoying your life.
Understand that you may get wealthy and even become a millionaire by the time you’re in your 60s, however, if you want to build wealth early on, your income is your biggest wealth-building tool.
You need to learn how to make more money. And the best way you can do that is by bringing more value to the marketplace.
Nowadays, all you need is an internet connection and you are able to start your business. You have no excuse.
CONTRIBUTED Rachel Miller