6 Year-End Money Moves You Should Make Right Now
Editor’s Note: This story originally appeared on The Penny Hoarder.
The year is drawing to a close, and you are undoubtedly in a hurry to finish your holiday shopping, get ready to travel, or meet a final deadline for work.
The last thing you need is another item on your to-do list, but a little financial thinking and planning is essential before the schedule turns to 2022.
Making those year-end cash moves will help you manage whatever awaits you next year.
1. Define your financial goals for the coming year
When you think about the end of 2022, what would make you feel accomplished? What if you cut your credit card debt in half? What if you could increase your savings account to four or even five digits? Or build that emergency fund that you may have had to dip into this year?
Think about what you want to celebrate at the end of 2022, then set goals to help you get there.
We’re fans of the SMART method of goal setting. A SMART goal is:
For example, “Become financially secure” is not a SMART goal because this statement is ambiguous.
On the other hand, “Save $ 5,000 in my emergency fund by the end of 2022” would be considered SMART because it is specific, measurable and timely.
Thinking about your financial goals in this way will give you more clarity on what you are trying to do, and it will give you a better idea of how to allocate your resources and energy over the coming year.
2. Review your spending over the past year (and be honest about it)
We know it won’t be fun. In fact, it’s probably going to be quite tedious.
Here’s a shortcut: If you use online banking or an app like You Need A Budget or Mint, you probably have access to graphs that show how much of your income has gone to specific expense categories, like food, entertainment and household expenses.
However, you can reconcile your expenses without digital tools.
Why is this so important? This is how to know where you are actually spending your money.
You might think you don’t have a single penny to lose and that’s why tumbleweeds are pouring into your savings account, but tracking your spending can reveal a different reality, one that you have actually spent. quite a bit of money, say, scented candles salvaged from clearance shelves at Target.
If you’re struggling to meet your financial goals and don’t understand why, knowing exactly where your money is going is the first step in aligning your actions with your goals.
Once you’ve tracked your spending, you’re ready to take the next step.
3. Build a budget that works – finally
Look, we know a lot of people don’t care about a budget. We surveyed 1,500 Penny Hoarder readers in April 2019 and found that 40% of them did not have a budget.
But you really, really need a budget. If you’ve never budgeted before, read this step by step guide to budgeting for beginners.
You can try any of these budgeting apps we love, or go old-fashioned with pen and paper and create a bullet journal, budget binder, or envelope system.
Our motto: If it works for you, then it works.
4. Extract your credit reports and examine them for errors
When you review your credit reports with a magnifying glass, here is what you might find:
- Accounts that don’t belong to you. You may have accounts on your credit report that actually belong to someone with a similar name. Karen Smith, do you really want Karen Smythe’s overdue Dillard payment card on your credit report?
- Accounts that you didn’t realize were overdue. Perhaps your dentist’s office repeatedly sent the invoice to the wrong address until the unpaid invoice ended up in collections, leaving a giant black mark on your credit report, and you were unaware of any of this until your auto loan or mortgage application was denied.
- Outdated or incorrect information about your accounts. Maybe you paid off a loan last year that still shows up as overdue, or your credit card balance is listed as much higher than it ever was. These could dramatically affect your credit score, and these three little numbers have a lot of influence over your ability to access credit in the future.
All of these errors can be disputed by contacting the appropriate credit bureau.
5. Make a retirement plan and stick to it
Needless to say, a lot of people haven’t saved much for retirement.
Instead of becoming another statistic, why not make 2022 the year when you finally take your retirement seriously?
We have divided the retirement planning process into one five step guide this will help you get started.
The first thing you will need to decide is what type of retirement account you want to create. If your employer offers a 401 (k), make sure you signed up for it.
And if your employer offers a 401 (k) match, at least contribute enough to take full advantage of it. After all, this match is part of your compensation. You are entitled to it!
And if you left previous jobs with 401 (k), transfer them to your new retirement account.
If you don’t have access to a 401 (k), you still have options, including IRAs and Roth IRAs.
Once your retirement account is open, contribute regularly. It doesn’t matter if you can only put in $ 25 a month – it all adds up.
6. Celebrate your victories!
While we are discussing how to do better in the future, we also know that you have probably accomplished things that you can be proud of in 2021.
Perhaps you started a side activity that has helped you make ends meet. Maybe you managed to save some money? Or maybe you’ve started learning about personal finance – after all, you are here, right?
Take a few minutes to think about what you’ve done over the past year that you’re proud of, and let it sink in.
And now, remember that feeling throughout the coming year, especially when you experience setbacks (because you inevitably will). Trust that if you stick to your plan, you will experience that feeling of satisfaction again around this time next year.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation for clicking on links in our stories.
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