Money management can sometimes feel overwhelming, particularly when dealing with economic factors such as inflation, government policies, wars and so on. These factors are all capable of disrupting anyone’s plan. However, there is never a time that is too late or a period that is too bad to re-plan and take a closer look at your finances and make a plan for your money.
The year 2022 might be eight months gone but with a good plan you can still make something good out of your finances. Below, we share three simple ways to take charge of your finances and set yourself up for a prosperous ending of 2022.
Assess Your Financial Situation
One of the best ways to manage your money is to have a clear sense of how much you have coming in and going out each month. The first step here is to make a list of your current income and expenses to get a complete picture of how you are spending your money. This list should include:
All sources of income (including part-time or side gig income)
Rent or housing expenses
Family/extended family expenses
With a clear plan in place and having a financial plan that shows all your major income streams and expenses, you can feel confident in achieving something tangible before the year runs out because this is the first and most important step.
Define Your Financial Goals
After assessing your financial situation, next on the list is to define your goals for the remaining part of year. Be sure to write down these goals so you can have a better idea of which areas to focus on. It does not matter how big or small the goal may be, if it is not properly defined it is as good as having no goals.
We also recommend that you prioritize your list, focusing on two or three main goals is a great way to boost your financial health without feeling overwhelmed.
Have a Manageable Budget
Once you have your goals in place, you can create your budget. Such budget should take into account your regular monthly expenses (such as housing and transportation) as well as additional expenses including feeding, hobbies and entertainment.
To truly optimize your budget, you may want to consider following the 50/30/20 rule which takes into account your current needs and long-term goals. Here is a basic sneak peek to what your budget breakdown should look like going by the 50/30/20 rule:
50% will be allocated to needs (including recurring expenses)
30% will be allocated to wants (such as nice-to-have items for your home but not needs)
20% will be allocated to financial goals (including your emergency fund and retirement savings)
By assessing your financial situation, defining your financial goals and having a strategic approach to budgeting like the 50/30/20 rule, you can limit any unnecessary spending and salvage the remains of the year or even make a greater ending to 2022 financially than you expected to.