It is important that you save at least 20% of your monthly income. If financial freedom is your goal, you can start managing your finances wisely in the coming year of 2022. Financial advisors always say to accumulate assets and avoid liabilities. In simpler terms, you should earn money and not debts. If you failed to do this in 2021, don’t worry because next year is another year for you to try. To help you out, here are five simple money tips for 2022 from www.upmoney.co.uk.
1. Define your Financial Goals
Why do you have to limit yourself when spending your hard-earned cash? You’ve probably experienced having a zero balance on your bank account and having to wait for the next payday just to have money for your bills. This is the reason why. Saving money is for emergency funds and for your retirement. If there is no drive or reason why you won’t be able to manage your funds wisely. Think of your financial goal as something that will stop you from using your credit card too much or spending too much on luxurious items.
Financial goals are savings, spending, or investing targets you aim for over a set period of time.
They can be short-term, mid-term, or long-term goals when managing your money. For short-term financial goals, they can be emergency funds for medical expenses, job loss, or any other sudden incident in need of financing. They can also be for your dream vacation abroad or as a downpayment for your dream car. For long-term goals, they can be for your retirement or marriage or for your child’s education.
2. Keep Track of your Cash Flows
Be the financial advisor or accountant you need. You don’t need a license just to manage your finances. There are credible sources online that you can rely on to gain knowledge of some financial terms, such as cash in and cash out. Keep track of all the funds that are coming in and out of your bank account. There are apps you can install on your phone that can record all your expenses and present the data to you in graphs or charts.
First, take note of all the monthly income that comes into your bank account and then the monthly expenses that come out of it. From there, you can see how much money you spend on your income. You can also see from this data whether you earn money or accumulate debt. This is the starting point for creating your monthly budget. See which areas you spend a lot in and by how much you can cut expenses in them. Do you spend too much on unnecessary subscriptions? Are your expenses greater than your income?
3. Pay your Credit Card Debt On-Time
Credit cards are a convenient and safe way to pay for your expenses. Not only that, but you also get rewards from the items you purchase using your credit card. The reward can either be in the form of points that you can convert to the latest gadgets on the market, dining and shopping deals, etc. Cashback is another form of reward credit card offers. These rewards are enough to motivate someone to just use a credit card rather than a debit card for their expenses.
Paying your credit card debt on time is also a tip for managing credit. If you have a good reputation for paying your bills, you will be able to maintain or further improve your credit score. The use of credit cards is a great experience for those who have self-control and really pay their credit card debt on time. But if this is not you, then this tip is for you. Pay your credit card debt on time otherwise, your bank will add up interest to this debt and further give you a financial burden you cannot escape from. Stick to your budget and stop yourself from using your credit card too often.
4. Start Investing
The average interest rate for a savings account is 0.06%. This means that if you save $1,000 for a year, you’ll end up with a $1,000.60 This may look small, but this is the safest way and has the lowest risk of earning money without exerting any effort, which is what they call a passive income. However, putting all your money in the bank is not recommended by many financial advisors. Investment should also be considered, especially if you want to increase the return from your money to 10%.
Having multiple streams of income is the key to financial freedom, and investing your money is one stream of income you should try in 2022. Others would go all-in with their investments and transfer all their income to the stock market. This is a big NO. If you are a newbie to the stock market, start with the lowest amount of money you can invest and work your way up. The stock market offers the biggest returns, but it comes with the highest risk of losing your money. Entrusting your money to a trusted stockbroker is one way to reduce the risk of investing in the stock market.
5. Set your Saving Automatic
Are you also one of those who always forget to allocate a percentage of their income to their savings account? Do you find depositing into your savings account a hassle? Make your savings more convenient by setting up an automatic savings plan. Every time you receive your paycheck from your employer, your bank will automatically transfer a percentage of it to your savings account. This way, you’ll only receive the money that you can spend on your needs and some wants.
An automatic savings plan is a type of personal savings system where you can automatically deposit a fixed amount of your income into your savings account at a specified interval, like every two weeks. The hassle of going to the bank just to deposit money into the savings account discourages people from saving. The automatic savings plan addresses this issue. If you are someone whose automatic response to a paycheck is to check out orders online, then this tip can help you manage your funds wisely.
Managing your finances wisely today can ensure a financially free and financially-secured future. Define your financial goals, keep track of your cash flows, pay your credit card debt on time, put a portion of your fund on the stock market, and set your saving automatic. Keep in mind all these money tips in 2022, and you don’t have to worry about where to get money in case of future needs for financing.