Personal finance is a sensitive topic to discuss in public. Well, not anymore. It is now a major topic across social media and the news. You will come across doom pieces on the global economy still struggling, leaving you wondering where to get your next meal. Things may look grim now, but no situation is permanent. The Healthy Financial Habits for 2022 guide has all you need to improve your situation.
With all the data out there, you may find it challenging to know what is credible. This five-step guide offers you an easy-to-follow action plan to help you get things in order. Keep reading to discover how you can repair the relationship with your wallet.
1. Where Are You Financially?
The first step is to assess your current financial situation, what experts call your tangible net worth. It is an honest inventory of your finances that will be the blueprint for your healthy habits for 2022. You get your tangible net worth by subtracting your total liabilities from your total assets, excluding any intangible assets you may have. These may be intellectual property, patents, or goodwill.
Tangible assets refer to everything you own, can touch, and convert to money. You will represent them using their current monetary value when calculating tangible net worth. Furthermore, your name must be on the deed of each item to consider it an asset. They include:
- Property is the house you live in, a shop you own, or a piece of land you have.
- Any vehicle under your name.
- Personal items like jewelry and artwork.
- The furniture at your properties.
- All active stock and bonds.
- Cashable life insurance policies.
- The available cash in your accounts.
Conversely, liabilities are everything you currently owe. These items qualify as liabilities:
- Your student and car loans.
- Mortgages on your properties.
- Credit card debt.
- Other outstanding payments such as your electricity and cable bill.
If your asset value is higher than your liabilities, the result will be a positive number. Regardless of the result, you can still apply the Healthy Financial Habits for 2022 guide to improve your situation.
2. Commit To a Specific Change.
After establishing your tangible net worth, you need to identify where you can make specific changes. The process involves creating a budget and ridding yourself of unnecessary expenditures. For example, you can sell your fuel-guzzling SUV and replace it with a more economical option.
Here are helpful tips for creating your budget:
- Identify your net income and create an emergency fund. For example, you can commit to saving 20% of your regular income for emergencies.
- Determine the value of your fixed expenses. These are liabilities you regularly pay, such as utilities and mortgage payments.
- Monitor your variable expenses and make cuts where necessary. For example, you can opt to bring lunch from home to reduce your restaurant spending.
- Use free budgeting software with reporting capabilities. Programs such as Mint offer you monthly reports on your tangible net worth and credit score. These help you identify any deviations in your spending, allowing you to make changes when necessary.
3. Employ Automatic Billing.
Sometimes committing to your budget can be a challenge. You can overcome this by enabling automatic billing for some of your expenses. For example, you can set automatic billing for your utilities and mortgage. As a result, your lights will always be on, and foreclosure managers will be off your back.
Similarly, you can instruct your bank to send money to your emergency fund. By doing so, you ensure that money is available when things are thick. In addition, most banks offer flexible automatic billing schedules. Therefore, you can activate the cycle to suit your paydays perfectly.
4. Reward Yourself For Every Complete Milestone.
You have a budget in place and clear financial goals for the year. So, how do you ensure these habits stick? A great way to ensure you stay on track is to reward yourself from time to time. Even dieters have cheat days.
Similarly, you can set up a quarterly or yearly reward scheme for each milestone you achieve. For example, you can agree to treat yourself to a vacation once you cross $100,000 savings. Doing so validates the process and motivates you to continue. Additionally, you can set up the arrangement with your bank to ensure you do not overspend.
5. Multiply Your Income Streams.
The final step in the Healthy Financial Habits for 2022 guide is to multiply your income streams. A key lesson from the pandemic is that having multiple revenue streams is the only way to avoid financial ruin. So rather than having all your money sitting idly in an account, use part of it to establish new revenue streams.
The following are simple ways to strengthen your financial position.
- Invest in your personal development.
As technology evolves, so do the job skill requirements. For example, businesses are exploring metaverse investment opportunities resulting from the invention of virtual and augmented reality. However, the process is slow due to a lack of professionals in this field.
You can strengthen your income by learning these skills and taking advantage of the available jobs. According to analysts, the Metaverse may reach a market value of $800 billion in 2024 as companies continue to expand its opportunities. With such a valuation, current experts must be earning millions.
- Start a side hustle.
You can also invest your money in a side business that you do after hours. For example, online freelancing can boost your revenues significantly since companies prefer these services to onsite workers. Additionally, you can choose your working hours, meaning your earning potential is limitless.
- Keep reading.
Finally, keeping yourself up-to-date can help improve your financial position. There are plenty of credible online resources, such as webinars, research publications, and blogs that offer insight into the latest developments in personal finance.
As you can see, improving your personal finance is not rocket science. So follow these five healthy financial habits for 2022 and realize that it gets better.