The cost of living in 2022 has made everyone think carefully about how they’re spending their money; especially with the costs of everyday goods and services like rent, gas and groceries rising. Whether you’ve been saving for years or are just getting started, now is the perfect time to reevaluate your savings strategy to set yourself up for success in the future. Consider these tips to help guide you through your savings journey.
Prepare your Budget
To better understand your budget, it’d be best to look at the breakdown cost of the goods and services in your budget a year ago versus some new, good ways to budget in 2022. Then, you can evaluate whether you need to increase your budget in different sections or not.
For instance, the cost of rent has increased across most cities in America. This is why you ’ll also need to consider whether or not you’re willing to downgrade or move your living situation to keep your monthly costs the same or whether you want to find room within your budget to maintain your current residence.
Do this with each item on your budget and decide if you should allocate more money towards that item, decrease it or remove it altogether. For instance, now might be the time to reduce eating out or entertainment spending.
Opt for local entertainment events that are free for the community or consider hosting events at your home where everyone brings something, like a potluck.
After you’ve considered your budget, you can then identify your savings goals and how aggressively you want to tackle those. A good place to start is with the 5 year roth ira rule they have various savings plans that should work seamlessly for you.
Advocate for Yourself
Some may not consider this but your yearly compensation review plays a big role in your continued saving and spending over your year.
Your ability to continue to reach or exceed your goals will rely heavily on your salary, especially in this current economic climate.
If your annual compensation review happens in January, chances are it’s not cutting it in terms of inflation. It may be time to sit down with your boss or HR and advocate for higher pay.
When going into this meeting, be prepared. Explicitly write down your value and contributions to the company since beginning your employment and focus on the growth you have demonstrated since your last review.
Be sure to calmly explain that your company is simply continuing to value you by increasing your salary to the cost of living.
Tackle your Debt
Debt can be a huge barrier to improving your financial status and meeting the financial goals in your life. It’s important to work on reducing and eventually eliminating that debt so you can reach those goals.
Student loans tend to be one of the biggest debts millennials face. Right now, we’re at a unique moment in history where federal student loan payments have been paused for over two years, meaning you’re not obligated to make your monthly payments and your loans aren’t adding compounded interest.
Currently, payments are set to resume in August but the current administration is deciding if that should be postponed even further. This offers you the opportunity to make your payments interest-free and pay down a huge chunk of your debt.
When discussing debt, it’s also important to look at your credit score. Your credit score is a key factor for getting loan approval for big purchases, like buying a car or estimating how much house you can afford.
The considerations that make up your credit score include the length of your credit history, your payment history, new credit, and your credit. tThe best way to raise your credit score is to pay your credit bill in full each month, instead of the minimum payment.
If you do this consistently over time, you’ll avoid building debt while also raising your score. Also, be wary of quick fixes to raise your credit score, as there is no quick fix and it’s more than likely a scam.
Plan for the Future
Thinking of your future can mean different things to each person or family. If you and your partner are thinking about having children, buying a home, or retiring early these are all things that need to be financially planned in advance.
Consider opening up a savings account for your different savings goals and having a percentage of your paycheck go right into those accounts, that way you aren’t tempted to spend that money before putting it away in savings.
Then, take into consideration the costs of your goals and determine how often you need to be contributing to the savings account to achieve a goal.
For instance, if your goal is to buy a home, calculate a realistic monthly payment and determine how much of each paycheck you can contribute to this savings on a monthly basis to achieve that goal on your desired timeline.
Planning for your retirement is another type of saving, but is just as important if you intend to travel or live in a retirement community like those at traditionsofamerica.com
The two most popular investment accounts are IRAs and Roth IRAs. A regular IRA is contributions put into your account tax-free, then is taxed when you take it out in retirement.
A Roth IRA is when your money is put into the account taxed and then you take it out tax-free.
Generally, professionals recommend a Roth IRA especially if you don’t anticipate retirement for at least 10 years. When planning, it is important to note the 5 year roth ira rule that stipulates that before an investor can withdraw the earnings tax-free, five years must have passed since the tax year of the first contribution.
The best way to optimize your investments is to put in your maximum yearly contribution, the longer your money is in the account, the more opportunity it has to grow.
You should also look into employer matching, as some companies offer an employer matching program, up to a certain percentage of your personal deposit. This is often an additional benefit, but could be negotiated as part of your overall benefits plan.
Whatever your financial goals are, there are ways to manage your money throughout the remainder of 2022 that can help you achieve them. Before making any drastic changes, make sure you talk to your family or a trusted advisor. Plan accordingly and you’ll be well equipped to reach your goals.