By Emily Alvarenga
Senior Signal Editor
After another year of pandemic stress and tensions, many are setting themselves financial goals that are essential to get back on track in the New Year.
It’s no surprise that more than half of 3,000 adults polled in a NextAdvisor poll in June said they felt very or somewhat anxious about their finances.
However, as 2022 kicks off, there are certainly ways to set financial goals that you can actually stick with.
Whether you’re looking to start saving for your first home, pay off debt, or just build better spending habits, here are some tips from the financial experts to help you do that.
Avoid creating goals that are too extreme
While it may be easy to feel that you need to hit all of your financial goals at once, after two such hectic years, financial advisors Patti Handy, Senior Mortgage Advisor, and Jerrod Ferguson, Vice President of Vance Wealth, highlight guard against biting more than you can chew and keep your financial goals reasonable.
Handy suggests picking two goals and focusing on them, adding that instead of fighting over missteps, just keep staying motivated in the face of challenges that present themselves.
She also suggests confiding in someone you can talk to openly to help you stay responsible, whether that is a friend, family member, or financial advisor.
Make it emotional
While emotion and habits play an important role in your actions, it’s the emotion that drives you to take action, according to Erick Arndt, financial advisor at Virtue Wealth.
Understanding why you are creating those financial goals will help you put the right habits in place until it becomes almost subconscious, Arndt said.
Handy agreed, adding that while it can be difficult to change that mindset, it is important to have this “why” tied to emotion.
Whether it’s because you want stability, peace of mind, or to be able to give back, it has to be something that is a trigger for you, Handy said.
Handy said it’s also helpful to have it written and posted somewhere so you don’t lose focus.
Find out where your money is going
Information is power, and Ferguson said the first step to building better spending habits is to look at last year’s finances and see where your money has gone.
Most credit cards and banks give annual statements, so getting the information you need shouldn’t be difficult and can be an eye-opener for many as it’s often overlooked, Handy said.
All three suggest creating a spending plan using your last year’s financial expenses as a basis.
Rather than setting a budget, create a spending plan, which Handy described as a license to spend money where you decide exactly what you want to spend your money on.
And while creating that plan is important, taking the pulse regularly and continuing to track your spending is more important because it can help make future spending decisions, Ferguson added.
Ferguson also suggests getting an update on all debts and accounts, including investments or retirement funds, as well as your credit report, which is offered free of charge each year by every major credit bureau.
Learn to live below your means
Arndt likens a living paycheck to a paycheck to driving a car at 5,000 rpm continuously – it will eventually break down, just like you can’t spend all you earn.
While the goal is to save 20% of each paycheck, Arndt suggests starting with $ 25 and working your way up.
Likewise, Handy suggests paying yourself first, that is, saving before paying off your debts, which she says is a habit of the rich.
Withdrawing that money directly from your audit is crucial to making sure you keep your pledge and can allow you to breathe in an emergency, Handy added.
Pay off the debt
The first step to paying off debt is to sit down and assess your finances to determine what is getting you in debt, said Greg Mahnken, credit industry analyst at Credit Card Insider, and Arndt and Handy both agreed.
Whether you choose the avalanche method, where you direct any extra money to pay off the loan with the highest interest rate, or the snowball method, where you invest that extra money towards the smaller balance, first you need to make sure that all of your accounts are in good standing and that you are making all of your minimum payments, according to Mahnken and Handy.
Each method has its advantages, but whichever one you choose, avoid spending on accounts while trying to pay off your debts because it’s easy to pay off, but it really compromises your progress, Mahnken added. If this is difficult, Mahnken suggests putting your card in a safe.
According to both Mahnken and Handy.
Do the math including fees to make sure you end up saving money, Mahnken added, noting that the fees are often cheaper than the interest you would pay.
Mahnken also suggested reading your card terms, as late payment can often void your offer.