.jpg)
By: Karen Schaeffer, CFP®
Published: January, 2022
A recent survey found the top three financial resolutions for Americans are to save more, spend less and pay down debt. No surprises there, but how do we really make 2022 the year of financial success? Before our great January intentions fade into unfulfilled promises of February, try these tips, culled from financial planners, to stay on track.
- Know your why. If you want to be successful at paying down debt, saving more, improving your credit score, or any common financial best-practice, make it personal. Want to feel more in control? Deserve a great vacation? Worried about the future? We all need to find our motivation if we want make changes for the better.
- Put some numbers together. The more specific, the more likely you are to set a realistic time frame for achieving your goal. What’s your idea of a lovely vacation? An hour or two of internet searching and you’ll have a good idea just how much money it takes to make that happen. Next step, determine how long it takes you to save enough money. You can always scale the trip back a bit instead of waiting but stick with the save-the-money-and-THEN-spend rule and you vacation guilt and worry free.
- Make it automatic. Ever notice how expenses that are automatically deducted from your paycheck quickly become out of sight, out of mind? If your payroll department won’t set up an allocation for your vacation fund (or pay off debt fund, or save for college fund, etc.) just about any financial institution will do it for you.
- It’s okay to start small. You may have heard the amount you can contribute to your TSP has been increased to $20,500 for this year ($27,000 for anyone 50 and older). Impossible, you say? Don’t despair. Every little bit helps. Try increasing your contribution by $50/pay and re-evaluate in March. Did you miss it? If not, bump it up again. Repeat annually and before you know it, you’ll be contributing like the pros.
- Find your balance. Are you a spend for today you-only-live-once person or a save it all for tomorrow I-don’t-want-to-run-out person? Make 2022 the year you find the sweet spot that works for you today AND tomorrow. Life is too precious to cut out all of today’s fun, but no one wants to regret their youthful spending when they can’t retire. Once you’ve paid all your monthly bills, how much is left over? Take half and invest in your retirement plan and put the other half in a separate account. When this account is big enough to give you a cushion against emergencies, open the “we’re going to have a good time” account and start planning some fun – you’ve earned it!
- Chart your progress. Create a system for monitoring your progress. Are you a spread sheet person? A Word document person? Or would you prefer an app? You can run but you can’t hide from your own common sense when you give your common sense some data to work with, so use a system that works for you. Until your financial resolution is solidly on track, monitor your progress each month.
- Find a Friend. Research shows that people who work out with friends are more likely to stick to their fitness goals. Talking with someone about your finance goals can have the same impact. It’s easier to let yourself slack when no one else is watching so find a money buddy (spouse, friend, or sibling) and let them know your plan.
- Rethink Your Debt. While interest rates are low determine if a smaller mortgage payment can help jump start your resolve to save more for other goals. Perhaps a consolidation loan is the tool you need to eliminate expensive debt. Exercise caution here and only consolidate once the other tips are firmly in place.
Happy New Year and happy planning!
Karen Schaeffer, CFP® is the Managing Member and Co-founder of Schaeffer Financial LLC, a financial consulting firm in suburban Washington, D.C. She has been advising clients for over thirty-five years and has developed a diverse client base including professional women, Foreign Service Officers, foreign nationals, and Federal government employees. She has been presenting seminars for NITP for over 25 years.
