Need a boost with your New Year’s financial resolutions? There’s no need to complicate matters, says Ashley Feinstein Gerstley, author of the upcoming guide to personal finance delivered “Financial Adult – A 5 Step Guide to Becoming an Adult With Your Money. A strong checklist can help you move forward with important things you may have been putting off. “When we make New Year’s resolutions, there can be a tendency to set big goals that require monumental changes in our behavior,” she says. “Don’t get me wrong, I’m a fan of big goals – but for success we want to break those goals down into small, realistic and manageable steps.” Here’s how to start getting your finances in order in 2022.
1. Start with a budget
Yes, it might sound snoozy, but Feinstein Gerstley says it’s a must-have tool for tracking your paycheck and making sure it goes where it’s needed. “Budgets have a bad reputation, but they are just a blueprint for where our money will go once it arrives,” she said. “Think of your budget as a way of deciding how to allocate your money in the way that will make you happiest in the short and long term. In other words, think of your budget as a way to take charge of every penny of your hard-earned money and make sure it works for what protects you (your big bills), debt-free (read our guide on the way out of debt here) and happy (your goals and dreams). Some budgeting apps to consider:
1. Personal capital: Forbes gives this free money tracking and budgeting app its highest score among “best budgeting apps,” at 4.5 out of 5 stars, noting that it is especially good for investors.
2. You need a budget (YNAB): This app is more expensive at $ 14.99 / month, but offers an in-depth look at your spending and savings. CNBC notes that this app is best for those who want to take their budget seriously.
2. Build up your emergency savings fund
The pandemic has shown us all the importance of having easily accessible savings in the form of an emergency fund or a rainy day. How much should you have stored? Pam Capalad, financial planner and founder of Brunch and budget, suggests taking a look at your gross bills (like food, shelter, basic utilities, and transportation) and keeping 3 to 6 months of that number in your savings. You should keep this money in an account with liquidity, such as a high yield savings account, so that you can access it quickly when needed.
You don’t have to wait until your emergency fund is topped up before saving for other purposes. What’s important is that the money is there when you need it.
3. Save more for retirement
Many of us may find it difficult to invest for retirement when we have bills to pay now. Feinstein Gerstley recommends starting small and saving more as your salary increases. For example, if your business has a 401 (k) match program, at least invest until it matches or you leave money on the table. “The sooner we start, the more time we give our money to grow,” she says. “Just because you contribute a certain amount now doesn’t mean you won’t be able to accumulate more later. “
If you don’t have a job that offers you a 401 (k), you can still open up and contribute to an IRA or Roth IRA. While it might seem daunting, there are some new inexpensive apps and services that are making it easier for newbies. These include:
1. Improvement, which Nerdwallet rates with 5 stars, noting that “Betterment is a clear leader among robo-advisors”. This is “the basic service has no minimum account and charges 0.25% of assets under management each year. Betterment Premium provides unlimited telephone access to certified financial planners for a fee of 0.40% and a minimum account of $ 100,000, ”the site notes.
2. Avant-garde is known for its low cost index funds. Vanguard Digital Advisor offers a low fee (0.15% management fee and a minimum of $ 0) to get started.
4. Review your insurance
Once a year, it’s important to do an insurance check-in, says Feinstein Gerstley, and January is a good time to do so. First, check if you have enough car insurance (this to guide can help you determine how much you need) and if you might get a better rate. A study found that changing auto insurance can save you $ 471 per year. You can shop for personalized auto insurance rates here.
Next, find out about your home insurance to make sure you have enough coverage and comparing rates to see if you could pay less.
You don’t own a house? Depending on your policy and the state you live in, a relatively cheap rental insurance policy, some starting at $ 12 per month, can protect you from smoke, fire, explosions, theft, vandalism. and other issues.
Then take a look at your benefits and make sure you’re happy with your disability coverage and if not, see if it makes sense to purchase an individual policy.
And finally, consider life insurance if you have loved ones who are financially dependent on you. Not sure how much insurance you need? Consider the DIME method, which stands for Debt, Income, Mortgage, and Education. Add up these costs going forward (for your annual income, you multiply it by the number of years your dependents will need it), and that’s about the amount of life insurance you’ll need. . “We tend to overlook all areas of our money. We neglect equal opportunities! Said Feinstein Gerstley. “But I would say the most common are the ones that require consistency. “