In part one, we went through the basics of what you needed to put in place before 2022. We covered everything from creating a budget, to having an emergency fund, managing your debts, and even optimizing your portfolio. But it’s one thing to plan, and it’s another thing to execute; you must have the right tools and mindset in place to be able to carry out your plans.
When you decide that you want to be better, especially at your finances, you might not know where to start exactly, and even if you do know where to start, you might not know how to go about it.
To that effect, we’ve added some additional actions you can carry out, to ensure 2022 is one of your best financial years yet. Let’s go!.
#1. Be Sure To Run A Review
The beginning of the year is a perfect time to conduct a financial SWOT analysis. Your financial SWOT – strength, weaknesses, opportunities, and threats- analysis should get a check-up at least once a year, and as a new year begins, it only makes sense to review the past year’s finances and know where to work on.
Also, while running your analysis, try to calculate your net worth. An excellent way to go about it is to
- Make a list of your assets (what you own)
- Remove your liabilities (what you owe)
Subtracting the liabilities from the assets would determine your net worth. This would help you keep a close eye on your finances and help you set more concise goals.
The most important thing is to see a general upward trend over your earning years regardless of how bumpy your financial stats might get. By carrying out a financial analysis before the beginning of the new year, you’ll be able to make informed decisions in the coming months.
#2. Discipline
Everyone knows you need discipline when handling finances. What most people don’t know, however, is how far discipline can take you, when applied to your finances. Not only would it help you in conforming to your spending and saving, but it would also ensure you stick to your plan and only do things that aid your general finances and not things detrimental to it. So make it a big deal to work on your discipline to help with all plans you have set in order to achieve your monetary goals.
#3. Map Out A Plan
This is another step you do not want to miss. It’s tough to be disciplined about how you manage your finances, however, a plan in place makes it easier. If you have no guidelines to follow, no benchmarks, no targets, no milestones, and no rules, discipline has nothing to work with. Therefore when creating a plan, consider both your short-term (for instance, how much you want to have saved by the end of each month) and long-term (for example, how many investments you wish to have added to your portfolio by the end of the year) dreams you have.
#4. Automate As Much As You Can
While penning things down and dealing with cash is a step in the right direction, automating your financial process makes things easier. This could be as little as setting reminders and using tools that help you track your finances. There is some free and straightforward budgeting software to help you stay organized. There are also tools that help you save, monitor the market, alert you to opportunities or pitfalls (another good example is ‘Bloom,’ which makes sure your IRA is on track, spots hidden fees, and assists in portfolio recommendations for free)
#5. Take Protective Measures
Do not sleep on insurance come 2022. Make plans for it, make inquiries and get the ones you can afford. Protect against substantial medical expenses with health insurance; consider a high-deductible policy if you don’t fall ill often to insure against the possibility of a severe illness or unexpected healthcare event. Update or prepare your will if you don’t already have one. Yes, it should be a crucial part of your 2022 financial goals. A will not only aid in transferring assets alone, it can also provide your family the necessary support and care they need should something go wrong. A will can also serve the purpose of helping you map out plans for debt repayment in your absence, such as a credit card or mortgage. While preparing it, make sure all documents are consistent and reflect your desires. When writing your will, also make sure you work with an experienced lawyer or estate planning attorney.
#6. Right Risk-taking
Almost every investment is a risk, and that means there’s a possibility that you may lose money and make an impressive return if your investment doesn’t go as planned. Technically, in modern investment theory, the greater the risk you take in making an investment, the greater your return potential would be if the investment succeeds and vice versa. So when deciding what risks to take, ensure you’ve done your due diligence to be sure you’re making the right choice. An excellent hint to knowing the right kinds of risks to toy with is by gauging the number of losses you’d suffer if they fall through. A known rule of thumb goes, if you don’t want to take at least some or any investment risk, you are likely to limit your investment return.
#7. Looking out for Opportunities
While researching the best investment to go for, also endeavor to look out for potential investments that can help improve your finances. Taking an inventory of the investments you’ve made in the past, should enable you figure out assets that are more likely to produce better outcomes in the future. It is beneficial to note down outcomes you would like to avoid and go for opportunities that suits your preference.
#8. Educate Yourself
2022 is the time to place priority on financial literacy. Go for knowledge. Make it a goal in 2022 to learn about trends and invest in them. An excellent place to get started would be books – personal finance books will become indispensable in your quest to be financially literate. Also, read magazines and publications like Financial Times, Fortune, Kiplinger, and other online financial advice resources (just like this one you’re reading right now).
If you find reading difficult or have a busy work and family life, consider listening to podcasts. They are perfect because you can listen to podcasts on your way to work, doing chores, at work (if it doesn’t affect your productivity), or even returning from.
If you’re retired or about to, then you want to have a financial strategy to help you make the most of the opportunities around you. The aim is to get your money working for you and not the other way around. Being financially literate is one way to achieve this. The new year will certainly be one with several bull and bear runs. But you can make the most of every single opportunity that you come across by having a financial plan in hand! Wishing you a financially secure new year in 2022! JMV Financial Services