4 simple things to do with your money now, so you start 2022 off on the right financial footing

Need a kick-start to your financial New Year’s resolutions? There’s no need to make it complicated, says Ashley Feinstein Gerstley, author of the upcoming personal finance guide book “Financial Adulting—A 5-Step Guide to Adulting with Your Money.” A solid checklist can help you get moving on the important things you may have been putting off. “When we make New Year’s resolutions, there can be a tendency to make big goals that require monumental shifts in our behavior,” she says. “Don’t get me wrong, I’m a fan of big goals – but for greater success we want to break those goals down into small, realistic and manageable steps.” Here’s how to start getting your finances in order in 2022.

1. Start with a budget

Yes, it may sound snoozy, but Feinstein Gerstley says it’s a must-needed tool to track your paycheck and make sure it’s going to the places where it needs to. “Budgets get a bad rap but they are just a plan for where our money will go once it comes in,” she said. “Think of your budget as a way to decide how to allocate your money in the ways that will make you the happiest in the short and long-term.” In other words, think of your budget as a way to take charge of every cent of your hard-earned money and make sure it’s working toward the things that keep you secure (your important bills), debt-free (read our guide on how to get out of debt here) and happy (your goals and dreams).  Some budgeting apps to consider: 

1. Personal Capital: Forbes gives this free money tracking and budgeting app its highest score among “best budgeting apps,” at 4.5 out of 5 stars, noting that it’s particularly good for investors.

2. You Need a Budget (YNAB): This app is pricier at $14.99/month, but offers a deep look at your spending and saving. CNBC notes that this app is the best one for those who want to get serious about budgeting.

2. Build your emergency savings fund

The pandemic has shown us all the importance of having easily accessible savings in the form of a rainy day or emergency fund. How much should you have stored up? Pam Capalad, a financial planner and founder of Brunch and Budget, advises taking a look at your bare bones bills (like food, housing, basic utilities and transportation) and keep 3-6 months of that number in your savings. You need to keep this money in an account that has liquidity, like a high-yield savings account, so you can access it quickly when needed.

There’s no need to wait until your emergency fund is topped off before you save for other goals. What’s important is that the money is there when you need it. 

3. Save more for retirement 

Many of us may find it hard to invest for retirement when we’ve got bills to pay now. Feinstein Gerstley recommends starting small and saving more as your paycheck increases. For example, if your company offers a 401(k) matching program, put in at least up to what they match or you’re leaving money on the table. “The sooner we start, the longer we give our money to grow,” she says. “Just because you are contributing a certain amount now, doesn’t mean you won’t be able to build up to more later.”

If you don’t have a job that offers you a 401(k), you can always open up and contribute to an IRA or a Roth IRA. While that may seem intimidating, there are new low-fee apps and services that make it pretty simple for beginners. These include:

1. Betterment, which Nerdwallet rates with 5 stars noting that “Betterment is a clear leader among robo-advisors.” It’s “base service has no account minimum and charges 0.25% of assets under management annually. Betterment Premium provides unlimited phone access to certified financial planners for a 0.40% fee and $100,000 account minimum,” the site notes.

2. Vanguard is known for its low-cost index funds. The Vanguard Digital Advisor offers low fees (0.15% management fee and a $0 minimum) to get started.

4. Review your insurance 

Once per year it’s important to do an insurance check-in, says Feinstein Gerstley, and January is a good time to do it. First, check in to see if you have enough auto insurance (this guide can help you determine how much you need), and if you might be able to get a better rate. One study found that switching car insurance can save you $471 a year. You can shop personalized auto insurance rates here.

Next, dig into your homeowners insurance, ensuring you have enough coverage, and comparing rates to see if you might be able to pay less.

Don’t own a home? Depending on your policy and what state you live in, a relatively cheap renter’s insurance policy, some starting as low as $12 a month, can protect you from smoke, fire, explosions, theft, vandalism and other issues.

Next, take a look at your employee benefits and make sure you’re happy with your disability coverage and if not, look into whether it makes sense to take out an individual policy. 

And finally, look into life insurance if you have loved ones who depend on you financially. Not sure how much insurance you need? Consider the DIME method, which stands for debt, income, mortgage and education. Add up those costs for the future (for your annual income you multiply it by how many years your dependents will need it), and that’s roughly how much life insurance you will need.  “We have a tendency to neglect all areas of our money. We’re equal opportunity neglectors!” says Feinstein Gerstley. “But I’d say the most common ones are the ones that require consistency.”