7 Ways to Take Control of Your Finances in 2022

7 Ways To Take Control of Your Finances
Aristotle Kumpis RealWealth Investment Counselor

Aristotle Kumpis

To say the past couple of years have been difficult for us all would be a giant understatement. With the stress of everyday life still at an all-time high, it is important to go into the new year with the mindset of positive change. Taking control of your finances in 2022 may seem like a difficult task, but it does not have to be. Below are a few tips to help you achieve financial stability this year and beyond.

Re-Evaluate Your Financial Situation

You can’t move forward with improving your finances without first understanding the state they’re currently in. Take an inventory of all of your debts and current interest rates associated with them. Ask yourself if your financial situation has changed significantly. Have you recently gotten married or divorced? Have you bought a house or vehicle? Do you have any large medical bills? The answers to these questions are all crucial to establish the baseline for your financial situation. Remember to be honest with yourself during this step.

Once you know where your finances lie, you can then begin to determine your goals for the future. Do you want to improve your credit score to buy a new house? Are you looking to pay off all of your student loans? Are you already in decent financial shape and just want to save money for the future? Answering these questions will set the groundwork for you to take control of your financial situation.

Reduce Your Monthly Bills

One of the most important things you can do to take control of your finances and meet your your personal finance goals is to reduce your monthly expenses. This can be done in a number of ways:

One of the most effective ways is to first take an inventory of all of your outgoing expenses each month. This should include everything from large expenses like utilities, insurance, and car payments all the way down to the seemingly insignificant streaming services.

Next, organize them into two lists: a necessary list, and an unnecessary list. From there, go through the unnecessary list and see where you can cut out some areas where you may be wasting money. Things like streaming services may seem like small expenses but when you eliminate four or five that you no longer use, that money adds up and can be put into savings or towards paying off debt.

Another area to explore when cutting down on your monthly expenses is to educate yourself on how to refinance a mortgage. With the housing market as hot as it currently is, refinancing can be a great way for current homeowners to find a better interest rate on their mortgage and lower their monthly payments overall. Long-term, this can result in you paying less for your house than you originally purchased it for, in turn putting more money in your pocket to allocate elsewhere each month. To hear some of our housing market predictions for 2022, check out our webinar here.

Create a Budget and Stick to it

Without a proper budget, you will be wandering around in the dark when it comes to your financial goals. When establishing your monthly budget, it is important to be realistic with your planning. For instance, you will probably not be able to save 50% of your income, and that’s ok. This is your time to figure out what will work for you and your goals.

In order to take control of your finances this year, you will need to know how much income you have to pay for your bills each month. This is where the necessary expense list from above comes into play. Add up all of your outgoing expenses, as well as how much income you’re bringing in each month. You can then begin to allocate funds to each expense, and when you are finished whatever is left over, that is your disposable income for the rest of the month. You may want to consider using a budgeting app to make this process easier as well.

Start Saving (if You Haven’t Already)

As mentioned before, when creating your monthly budget to take control of your finances, it is crucial to include a savings plan in those numbers. This can be used as an emergency fund, college savings, or even just a rainy day fund. Many financial experts recommend using a high yield savings account when deciding how to save money. A high yield savings account, put simply, is an account with a much higher interest rate compared to a traditional savings account. These are a great way for your money to work for you while it sits there, generating a small amount of passive income for you each year.

Another effective way to save your money is to take advantage of a 401k plan. Many employers offer 401k plans to qualifying employees and oftentimes they will match your contribution up to a certain percentage. This money is taken out of your paycheck each cycle before taxes and is a great way to save up for your retirement.

To take that a step further, you may also want to explore other investing options. This process may seem complicated and difficult but there are tons of resources out there for beginners. Investing is a great way for you to spend your money effectively while creating long-term wealth for yourself. At RealWealth, we believe the very best way to create long-term wealth is to invest in assets that produce positive monthly cash flow – assets like buy and hold real estate. To learn more, check out our recent webinar: 5 Ways To Make Money in Real Estate.

Pay Off Credit Card Debt

Credit cards can be a blessing and a curse when trying to take control of your finances. When used effectively, they can be a great way to purchase large ticket items and pay them off gradually over time. However, when used incorrectly, they can be one of the biggest wastes of money to your monthly budget. If you have gotten yourself into credit card debt, there are some ways that you can effectively pay it off as fast as possible with minimal effect on your finances.

Make sure that you are targeting your card that has the highest interest rate. Paying this off first will ensure that you are paying as little interest as possible over time. It is also crucial that you pay more than the minimum payment each month. Again, this will ensure that you are paying the smallest amount of interest possible.

Another option to streamline the process of paying off your credit card debt is to use a debt consolidation service. This allows you to pay a smaller amount of interest overall as well as gives you the convenience of only having one payment a month. This option is great if you have a high amount of credit card debt that is spread out over multiple accounts.

Find Ways to Supplement Your Income

If you seem to be coming up a little bit short each month or are just looking to save more money for a long-term goal, you may want to explore the many ways you can supplement your income. If you have some extra time during the week, or even weekends, a part-time job could be a great fit for you. With the Great Resignation in full force, many jobs that were previously considered lower-paying have raised their pay to encourage new applicants.

If you are looking for something with a little more freedom and less commitment, you can look into ride-sharing services such as Uber or Lyft, or food delivery services like GrubHub and DoorDash. These offer the freedom to work around your schedule and depending on your area, can pay between $10 and $20 per hour.

Finally, another option to supplement your income to take control of your finances is to explore freelancing options. There are many companies out there that allow you to become a freelance copywriter or editor in your downtime. Or maybe you have a hobby that could make some extra cash by creating an online store. All of these are great ways to put a little extra cash in your bank account to help you save money and pay off debt.

Ask For Help

Lastly, and arguably most important, is to ask for help when you need it. Not being in the best financial situation can leave you feeling lost and embarrassed. But by taking advantage of professional financial services, you can eliminate that feeling while at the same time educating yourself on how to do better going forward. Being honest with yourself will help you make the best of your situation.

Deciding to start the journey to achieve financial independence can seem like a huge undertaking. By breaking the process down into the smaller and manageable steps above, you will be on your way to a new financial future in 2022.

Aristotle Kumpis RealWealth Investment Counselor