Along with the new year that brings confetti and a new calendar, now is the time to set some important goals for the next 12 months. It could mean finally paying off debt, buying a house, or taking a long-delayed vacation.

With inflation and economic uncertainty clouding 2022, consolidating your finances this month may seem even more urgent.

“When you plan to start the New Year or another important date for you, it may be easier to change behavior because we feel like we are making a fresh start,” says Jeremy Burke, senior economist at the Research Center. Social and Economic Studies at the University of Southern California.

Here are five steps financial experts recommend to help you reach your financial goals in 2022:


1. GET A CLEAR VIEW ON YOUR FINANCES

“The first step for everyone is to get organized,” says Phuong Luong, certified financial planner at Saltbox Financial in Massachusetts. It means making a list of your savings, debts, and assets. Having a complete picture of your finances can help you decide what to focus on for the New Year, she says, and provide an easy-to-update document each year.

Luong also suggests tracking your monthly cash flow with a spreadsheet or app to help answer questions about how much mortgage payment you could afford or what expenses you might be able to cut. “If you organize these numbers, it’s easier to have these conversations, with a professional or with yourself, about what you can actually afford,” she says.

A comprehensive self-assessment includes reflecting on your values, which may have changed during the pandemic. “Find out what is really important to you. Maybe you don’t want to spend that much on clothes, or you would like to help more charities. Maybe instead of a car you want a nice desk and chair. It’s easier to follow your budget when it’s aligned with your values, ”says Shari Greco Reiches, wealth manager in Illinois and author of the book“ Maximize Your Return on Life ”.

2. TAKE A BABY STEP WITH YOUR EMERGENCY FUND

Emergency funds provide flexibility and convenience if you face unexpected expenses, but creating one can be tricky. Behavioral economics suggests starting small, says Burke.

“Instead of setting a goal of saving $ 400 per month, it might be better to save $ 100 per week or an even smaller amount each day. There seems to be less friction to start when the time period is shorter, so it’s just pennies a day instead of dollars a month, ”suggests Burke.

This means that if your goal is to save $ 1,000 by the end of the year, increase your odds of success by thinking about saving $ 2.75 per day.

3. AUTOMATE LONG-TERM SAVINGS

Another lesson in behavioral economics, says Burke, is to set up automatic transfers in your savings every month. “In terms of improving long-term results, it really helps to automate things as much as possible,” he says.

For example, if you contribute to a retirement account directly from your paycheck, you only need to create it once and your savings will continue to be deducted. You can also sign up to automatically increase the percentage you save each year or each time you get a raise, Burke adds. You can set up similar automatic transfers to an Education Savings Account or High Yield Savings Account for other purposes, such as saving for a down payment.

4. REPAY THE DEBT WITH THE LOWEST BALANCES

For Americans hoping to pay off their high-interest debts this year, David Gal, professor of marketing at the University of Illinois at Chicago, says his research shows consumers are more successful if they start by focusing. on smaller balances, called debt snowballs. method. “It gives the impression of success and progress, and increases the motivation to pay the bigger accounts,” he says.

Daphne Jordan, CFP and wealth advisor in Texas, emphasizes the importance of staying positive. “Think about where you want to go in this new chapter of life,” she suggests. “Don’t see your financial past as a mistake. It’s all a learning experience.

Having a responsible partner to check in with can also help keep you on track, says Rianka Dorsainvil, CFP in Maryland and co-CEO of 2050 Wealth Partners, a financial planning firm. “As with fitness, if we can have someone watching us, we are more likely to be successful. “

5. PLANNING A LITTLE FUN TOO

Budgeting for 2022 doesn’t have to be depressing – you can also incorporate fun spending plans, which can include reconnecting with friends and family. “If you want to take a trip in August, think about the cost of the plane ticket, the hotel and the food,” says Dorsainvil. If it totals $ 3,000, try to start saving $ 375 per month through August.

That way, she says, “you are realistic and set measurable goals” – two approaches that increase your chances of success.

___________________________________________

This column was provided to The Associated Press by the NerdWallet personal finance website. Kimberly Palmer is a Personal Finance Expert at NerdWallet and author of “Smart Mom, Rich Mom”. Email: [email protected] Twitter: @KimberlyPalmer.

RELATED LINK:

NerdWallet: How To Use The Debt Snowball To Pay Off Debt