Take a New Look at Your Money Habits

The COVID-19 pandemic is about to move into the third year of existence, and pandemic exhaustion has hit almost everyone. But, the beginning of a new year always creates a feeling of starting fresh and encourages us to set new goals. Developing new financial plans in 2022 should be on the top of our lists. As you reflect on the past couple of years, focus on your experiences. Build on what worked and didn’t – to shape this year’s money habits. Here are some ideas to consider as you set your financial goals for this new year.

New Savings Account

Start by opening a savings account to accumulate the funds to reach long and short-term goals. You could open an account for each project. Next, determine the cost for each task and start depositing funds in each account to reach your goals. There are many types of savings accounts available at local banks and credit unions. Select the savings accounts that best meet your needs and plans.

Small Step: Decide on the type of savings account that will meet your goal and commit to depositing a set amount regularly to get into the habit of saving. If you open a basic savings account, deposit $25 every month and sign up for a direct deposit or automatic withdrawals from your checking account. Once you’re comfortable saving a small amount consistently, you can increase it.

Pay Down That Old Debt

The thought of taking a hard look at the status of my economy can be daunting and, frankly, very frightening. Confronting your debt and thinking about paying it off can be overwhelming. Make a list of your debts, noting the monthly payment, current balance, and interest rate, and make a plan to start paying down the debts. Many experts recommend focusing on either debt with the highest interest rates or obligations with the lowest balances to pay off. One of the fastest ways for paying off debt quicker is the debt snowball method. Using this method, you pay off the smallest balance first and keep using the extra money to pay on the next balance until you pay all of your debts. The debt snowball method aims at giving you small, quick wins to keep you motivated as you repay your debt.

Small Step: Whichever method you choose for paying down debt, start by adding a small amount to one of your current payments. For instance, if you focus on paying off a credit card with a minimum monthly payment of $100, add $25 to that amount to start (for a total monthly cost of $125). Once you are comfortable with that new amount, add more when you’re able and stay focused on the goal.

Get Organized

Debra Pangestu, a writer for the online site myMoneyCoach, said, “An important part of keeping your finances in good shape and getting yourself out of debt is organizing your finances.” Keeping your finances organized will help you control your money and achieve your financial goals.

Getting organized includes making a budget, tracking your spending, and putting a system in place to ensure you pay your bills on time every month. Be sure to monitor your credit card and bank statements for any unexpected fees or unusual activity. The sooner you find mistakes or unauthorized transactions, the easier it may be to correct those issues.

Small Step: Like dealing with debt, organizing your finances can be daunting, so start small by picking one organizational task and focusing on that task for one month before adding another. For example, you might start by setting up automatic bill pay from your bank account to make sure you pay your bills on time. Give yourself one month to learn about it, set it up, and get comfortable using it. Next month, focus on creating a budget, which gives you several weeks to learn about budgeting and work on it.

Protect Your Money

With so many financial transactions occurring electronically, it’s essential to protect your personal information, including your credit card and bank account numbers. Never provide your personal information in response to unsolicited requests, whether over the phone or the Internet. Always track your bank and credit card statements and your credit reports for unusual activity. Early detection of stolen information allows you to take the necessary steps to prevent more harm in the future.

Small Step: One vital step to protecting yourself from online scams and theft is regularly changing your passwords. If you have been using the same passwords for your financial accounts for a while, create new, difficult-to-guess passwords and change them often to keep your money safe.