2022 is the year of changing the way how you spend your money.
You’re more than capable of budgeting, paying off debt for good, and putting money toward your retirement every month. You don’t have to keep repeating the cycle of living in debt and not saving money.
This post teaches you
- Seven steps to take for a strong financial year
- Resources to help you get started with each task
- Tips to help you succeed financially
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Let’s get started.
1. If you have debt, do this
First things first, if you have debt, we need to create a plan to get rid of it.
Write all of your debts down. For example, you may have a credit card balance of $2,000, student loans of $13,000, and a car loan of $5,000. And more importantly, you need to find out each debts interest rate.
Now that you know your debts and interest rate, there are two debt payment strategies to choose from, the avalanche method and the snowball method.
The avalanche method works by paying off your highest interest rate debt first. The snowball method works by paying off the credit card with the smallest balance first.
The avalanche method is the smartest way to pay off debt since you’re tackling high interest rate debt first. For example, if you have a student loan at $2,000 with a 5% interest rate and another student loan at 3%, you want to tackle the 5% interest rate first with the avalanche method.
The snowball method keeps you motivated to keep paying off your debt since you’re getting rid of loans quickly. For example, if you have a student loan of $2,000 and a student loan of $5,000, you would pay off the $2,000 loan first with the snowball method.
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2. Come up with ways to make more money this year
With over 27% of side hustlers relying on extra income to cover their monthly bills, side hustles are more popular than ever.
Side hustles can make you $200 a month to $3,000+ a month. Some people start a start side hustle and it eventually becomes their full-time job.
Having a side job is great for people that need flexibility, some extra money, want to work from home, and be their own boss.
I have four side hustles that make me money. Having multiple streams of income is crucial in case you lose a job or hours are cut at work.
Here are ways to make extra money
- Filling out surveys
- Freelance writing
- Starting an Etsy shop
- Working from home as an English teacher to kids in China
- Starting a blog
- Pinterest virtual assistant
- Finding a remote job on FlexJobs
- Proofreading from home
Read the following
- How I’ve Made Over $250,000 With My Side Hustles
- 16 Real Work From Home Jobs That Make Up To $75,000 A Year
3. Start investing
Do you have $0 saved for retirement? Or are you not investing consistently?
Investing your money for retirement is one of the smartest things you can do with your money.
We’re not taught how to invest our money in grade school, but you can teach yourself how to invest your money with the many resources online. I taught myself how to invest by taking an online course.
How To Build Wealth by Investing in Index Funds course teaches you how to invest your money simply and wisely. You learn how to 1) open an investment account 2) how much to invest 3) and how to choose an index fund. It’s really that simple.
The creator of that course also has a free webinar on YouTube that shares how to invest in index funds.
This infographic below shows how important it is to invest consistently. Ashley and Amanda are the same age and take home the same amount of money each month. Ashley invests nothing and Amanda invests $800 a month. Ashley is broke at retirement and Amanda has a net worth of $2,000,000+ at retirement.
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4. Take a hard look at how you spend your money
It’s hard to see how you’re truly spending your money when you’re living day by day, but when you take a look at your spending at the end of the month, the results are shocking.
The best way to stay on track of your finances is with a budget. I know it doesn’t sound fun, but you NEED a budget. It’ll help you pay off debt so much quicker when you know where your money is going. Your money needs a plan. A budget does that for you.
Here are a few methods to budgeting
Budgeting is the most important thing you can do with your money because once you have a plan for spending your money, you can allocate money to your savings, debt, and retirement.
When I started budgeting, I was shocked at how much I was spending on groceries and restaurant outings. It’s still something I’m working on and have to follow closely each month.
Budgeting sucks at first, at least for most people. It’s extra work and annoying, but once it becomes a habit, it’s easy and you may even look forward to it like I do.
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5. Save for an emergency fund and sinking funds
An emergency fund is a set amount of cash you have set aside in case of emergencies. You have peace of mind with an emergency fund because you know you will have everything covered financially in case anything happens.
A sinking fund is a certain amount of money you set aside for a certain expense that usually comes up quarterly or annually. Your sinking fund is used to help manage your money.
Both of these funds are incredible because they help give you peace of mind in case anything ever happens. You’re always prepared financially and it feels so good!
I have an Ally Bank account and they have an entire section dedicated to sinking funds. It’s seriously the best bank account! I can’t recommend it enough.
I recommend reading the articles below because they’ll tell you in detail how to set them up and what kind of funds to have.
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6. Set up automation to help you stress less
All of your monthly bills can be automated, one way or another. This helps you because you have less things to think about, and you’ll never miss a payment.
These bills can be automatically paid for you
- Cell phone
- Streaming services
You can even use Zelle which automatically sends out monthly checks for you. Zelle’s great if you have a landscaping crew coming to your house every month or any other kind of monthly bill you pay that can’t be automated online.
7. Set a financial goal each year
Without a goal in place, you have nothing to work toward. Goals are so much fun and keep your brain excited to work on a task.
My household’s current financial goal is paying off my husband’s student loans. We’ve already made such great headway and it feels so good seeing how much we can do in just one year. We’ll most likely have all $62,000 in student loans paid off in under two years, though much of that is due to earning a high income and monitoring our budget closely.
Here are some great goals you can make
- Pay off all credit cards
- Fill an emergency fund worth 3-6 months of living expenses
- Start a side hustle that makes an extra $500 a month
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Here are my favorite ways to save money:
- Get cash back on groceries (even healthy foods) with Ibotta. Get $10 for signing up for Ibotta here.
- Slash your cell phone bill in half by switching to Tello. Tello plans start at $5 and the highest plan being $39. You can cancel or upgrade your phone plan any time you want and keep your existing number. I only need the $19/month Tello plan which gives unlimited text and calling, with 4GB of data.
- Move your money into a high-yield bank savings account. Your bank right now probably offers 0.03%. That’s nothing. CIT Bank currently offers up to 1.70%. You can move your money and emergency fund to a high-yield savings account to save even more money. Open a CIT Bank account here.
- Cancel gym, streaming, or other memberships you aren’t using
- Save money on meal planning and save time grocery shopping with $5 Meal Plan. You get your first 2 weeks free here.
- Lower your bills like your cell phone, internet, cable, insurance, and more with Billshark. I used it myself and saved $290. All you do is upload a bill that you want to save money on here.
- Get cash back on online purchases (pretty much anywhere) with Ebates. You get $10 for signing up for Ebates here.
- Get the best coupon codes instantly when shopping online with Honey.
Favorite financial books
- The Simple Path To Wealth
- I Will Teach You To Be Rich
- You Are A Badass At Making Money: Master The Mindset of Wealth
- Money Master The Game: 7 Simple Steps To Financial Freedom
Favorite financial podcasts
If you’ve been wanting to make a change in your financial life for awhile, now’s the time. Get started today with #1 and move on to #2 and so on. You can do this!
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How are you taking control of your finances this year?
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