How to set financial goals in 2022
Last Updated on June 14, 2023 by Chris Franchina
Just like that, it’s 2022. This means it is time to review your goals, change things to keep on track, or set new goals. No one wants to waste time or money on something you can avoid. Creating a financial plan takes a little bit of your time but can have remarkable outcomes. Just schedule the time you need to review your finances!
The following steps will help you create your long or short-term financial plan.
- Take a close look into your budget, cash flow, and other assets.
- Reduce your bad spending habits and make sure you’re moving towards your financial goals.
- If you already have a plan, did you stick to it? Or could you have done better?
Let’s start 2022 off right with a review of your financial habits for 2022.
What are your plans or dreams for 2022? A new year means new possibilities. Take a look at the past twelve months and ask yourself these three questions
1. How are you doing financially?
2. Did you stay within your budget?
3. Did you save more or less than you wanted to? If you didn’t, what was the reason?
Write down all your answers; this will give you an overview of where to improve. It is okay if you haven’t reached your 2021 goals. Mistakes are part of the learning process.
Next, review your insurance policies and ask yourself the following questions:
For life insurance:
1. Are your beneficiaries still correct?
2. Do you need to increase the death benefit? This is important if you recently had a life event, like buying a more expensive house, having a baby, or getting married.
3. Do you need to go from term to permanent life insurance because your insurance needs have changed?
For disability insurance
- Will you have enough money to continue your lifestyle financially if you can’t work due to an illness (physical or mentally)?
- If you changed jobs or got a raise, you might want to review your disability insurance policy and check if you have enough coverage for your specific needs.
For health insurance:
- Have your health needs changed? Adjust your coverage accordingly.
- Do you want to lower your deductible?
- Do you want to lower your monthly premium?
- Did your prescriptions change?
- Are you going to your preferred pharmacist or doctor? This can save you a lot of money.
Review subscriptions
- Check if you are overpaying for your current subscriptions. Sometimes, you can get a better deal somewhere else.
- Also, check if you use them regularly; if not, cancel them.
Review your investments
How are you doing? Do your investments match your risk tolerance?
How to Determine Budget & Goals
Budget
It is crucial to determine a proper budget and stick to it. This can have a significant impact on whether you will reach your goals. There are a couple of things you need to do before establishing your budget. We will list these steps below:
A: Determine your 2022 monthly income:
Tips to earn more:
- Find an extra gig where you can earn money passively
- Learn a new skill and use it to make money
- Max out your retirement plans
- Check if you can get a raise
- Sometimes it is better to find a new job; some company’s new hiring budget goes into effect in January or February.
B: Determine your future 2022 expenses
This includes everything you need to pay for, such as a mortgage, rent, car loan, insurance, groceries, utilities, loans, credit card bills, planned savings, emergency funds. Also include planned expenses for investments into your business, getting married, divorced, medical procedures, having children, or buying or renovating a house.
*tip: Track your expenses for the upcoming three months to ensure it is the correct amount and set dates for a checkup. You could set this up for every three months, for example. Things can change, and you might want to change your budget based on your checkups.
C: Emergency Fund *IMPORTANT Don’t forget to include an emergency budget in your financial plan. This way, you can protect yourself from unexpected expenses, relieve you from financial stress, and give you more freedom and a better focus on dealing with them.
D: Loans & Creditcards:
If you are thinking about taking out a loan, make sure to check how the monthly payment will affect your financial plan. Make sure to compare multiple loans to get the best interest rate. Also, check out your current credit card offers. Would you have a lower interest or better rewards if you switched credit cards?
E: Get ready for your Tax-Return: If you start preparing now, come tax season, you’ll feel less stressed, be prepared ahead of time, and avoid those late filing fees.
*Remember to review your tax bracket for the year to understand better what you might owe. Doing this will prevent a setback on your financial plan from unexpected tax expenses.
How To Set Goals
Set attainable goals: have you heard of the SMART method?
Many people use this tool to make sure their goals are reachable.
SMART stands for Specific Measurable Achievable Realistic Time-Limited
- Specific: State exactly what your goal is
- Measurable – Determine the exact amount you need to achieve the goal
- Achievable – Determine how it can be reached based on your budget
- Realistic –The goals have to be attainable and realistic
- Time-Limited – Set an end-date for when the goal has to be reached
Now it is time to write down your short and long-term goals. In step 1, you have reviewed your previous financial plan or behavior, so now you know the areas that you can improve and develop ways to avoid the previous mistakes you made (if any). It is important to write down all the steps you have to take to achieve these goals; this makes it easier to avoid your previous mistakes. Another significant benefit of doing this is checking these list steps to determine and track how close you are to your goals or what you still need to do to reach these goals. A professional advisor can help you with this.
The following are example short term goals (< 5 years) you can set for 2022
- Grow your savings + (amount) & (date)
- Pay off a % of your loans by (date)
- Increase or build an emergency fund + (amount & date)
- Pay off your credit card balances by (date)
Long-term goals could be:
- Saving for retirement
- Financial freedom
Stop living paycheck to paycheck.
A survey found that most Americans have lived paycheck to paycheck since the pandemic. They are also regretting not having any emergency funds (CNBC).
Financial freedom is key to making decisions based on other things than money. Your money is essentially working for you. Having enough cash lets you decide what you want to do, where you want to live, how to work, or even help others. It will take some work to get there, but your quality of life goes up once you are there. Another benefit is that it can decrease financial stress significantly and give you time to do things that make you happy or focus on other important things such as family.
The most common mistake many people make is that once they make more money, they increase their expenses; a more expensive car, house, or spend more on eating out luxury items and other things. Living this way means that you keep living your life based on financial obligations. What if you have an unexpected bill, or what if you can’t work and you won’t get that paycheck for a couple of months due to a disability or illness. Then you are left with the expenses and financial stress on top of that.
Tips to start your financial freedom journey
1. Determine why financial freedom is important to you and what it means for you. What will your life look like, and what will you do. Financial freedom can mean something different for everyone. Some people will achieve their version of financial freedom when they retire early, pay off their debts, or travel all year round.
2. Pay off your debt; this will release you from financial stress and allow you to grow your money instead. Start with your highest-interest debt first.
3. Start by saving a portion of your money; you don’t even have to think about it if you automate your savings.
4. Educate yourself; financial literacy will help you make smart financial decisions and set goals.
If you are ready to change your lifestyle and learn more about financial freedom, click the button below to go to financial freedom navigation to learn more or schedule a meeting.
With our financial freedom software, you can use the features that are listed below:
- Financial Goal Setting
- Retirement Income Forecasting
- Budget & Expense Analysis
- And more!