The Frugal Creditnista

Financial Wellness: How to Get Your Finances in Order for 2022

Wellness has been on most folks’ minds in the last couple of years. But aside from taking care of yourself physically, you also need to ensure your finances receive the same treatment. If organizing your personal finances is a goal for 2022, we've got you covered. Here's how you can Marie Kondo your finances now and repeat this strategy year after year.

1. Set a Monthly Budget

how to budget when you are broke

When taking on any type of financial endeavor, you need a solid starting point. For personal finances, that starting point is usually a budget. You should know exactly how much money you're bringing in each month, as well as how much you are spending and what you're spending your money on.

 From there, you can start allocating your incoming funds to your outgoing expenses. If what you're bringing in is less than what you're sending out, you will need to find expenses to cut. But if you have a surplus, you need to have a way to manage it wisely without being tempted to add new expenses.

2. Create a Debt Paydown Strategy

Doing a budget exercise is a great way to get a better idea of your debt profile. When reviewing debts, you should pay attention to the minimum monthly payments for each bill, the interest rate, and the balance. Debts that have a higher interest rate should be prioritized so that you can pay them off quicker and save money on interest. You may also want to prioritize debts that have a low balance. Once you pay those off, you can remove them from your monthly budget altogether. 

Regardless of your debt profile, you should aim to pay more than the monthly minimum as often as you can. This will not only help you get out of debt faster, but also ensure that more of your payment goes to the principle and not interest. 

3. Automate Your Finances

A late fee can cause a dent in your bank account. A lot of late fees can completely derail your budget. Avoid late fees by automating your finances when possible. Set up automatic bill pay if you can confidently pay those bills on time without the fear of overdraft. And if over drafting is a concern, you may only want to automate the bills that you know you can pay at certain times of the month.

Automating your finances also applies to your savings account. Consider automatically rolling over a certain amount or percentage each month into a savings or money market account. Or, you may want to use financial apps like Acorns that will help you grow your savings with spare change on each purchase.

4. Give Your Financial Docs a Home

Organizing your finances is not like spring cleaning. You don't just focus on finances once a year and then let it run until they get dusty and dirty again. Rather, taking control of your finances is an ongoing process. 

To help you stay organized and make financial review feel less like work, create a space dedicated for all of your bills, bank statements, and other financial documents. This might be a collection of file folders, an entire filing cabinet, or a catch-all bin on your bookshelf. This gives you and your spouse a common area to place all items related to your finances so that you have everything you need when it's time for another review.

As an added benefit, using a single location for all of your financial information can be helpful for your loved ones if you were to suddenly pass away. They will have all of your banking information, bills, and creditors in hand to help navigate any financial roadblocks.

5. Make Financial Review an Ongoing Date

budgeting for home ownership

Whether you live alone or share financial responsibility with someone else, it's a good idea to make reviewing your finances a recurring event. Set a date each month ( preferably the same date to help you stay on track) and go through your bank statements and bills to see how your financial situation changes from month to month. This is a good way to keep your spending and budget on target. 

Plus, since life happens to all of us, you can remove paid-off debts and factor in new expenses that you didn't have when you first created your budget. As you stay on top of financial management, you can adjust your spending and savings allocations as needed.

Final Thoughts

Remember that organizing your finances doesn’t always happen overnight. It takes commitment and buy-in from you and your partner, as well as careful and ongoing monitoring of your expenditures. But speaking from experience, it does get easier with practice.

Get a jump start on organizing your finances for 2022 — visit our free financial resource center!

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