The year is almost over, and you’re no doubt rushing to wrap up holiday shopping, get ready to travel or meet a final work deadline.
The last thing you need is another item on your to-do list, but a little bit of financial reflection and planning is essential before the calendar turns to 2022.
Making these end-of-year money moves will help you handle whatever comes your way next year.
1. Set Your Financial Goals for the Coming Year
When you think ahead to the end of 2022, what would make you feel accomplished? What if you cut your credit card debt by half? What if you were able to boost your savings account to four — or even five — figures? Or build up that emergency fund you may have had to dip into this year?
Think about what you want to celebrate at the end of 2022, and then set goals to help you get there.
We’re fans of the SMART method of goal-setting. A SMART goal is:
For instance, “become financially secure” isn’t a SMART goal because it’s ambiguous.
On the other hand, “save $5,000 in my emergency fund by the end of 2022” would be considered SMART because it’s specific, measurable and timely.
By thinking through your financial goals in this way, you’ll have more clarity about what you’re trying to do, and that will give you a better sense of how to allocate your resources and energy in the year to come.
2. Review Your Spending Over the Past Year (and Be Honest About It)
We know this isn’t going to be fun. In fact, it’s probably going to be pretty tedious.
Here’s a shortcut: If you use online banking or an app, you likely have access to graphs that show how much of your income went to specific spending categories, such as food, entertainment and household expenses.
However, you can reconcile your spending without digital tools.
Why is this so important? It’s how to find out where you’re actually spending your money. You might think you don’t have a single penny to spare and that’s why tumbleweeds are rolling through your savings account, but tracking your expenses can reveal a different reality, one where you’ve actually spent quite a bit of money on, say, scented candles rescued from the clearance end caps at Target.
If you’re having trouble achieving your financial goals and can’t figure out why, knowing exactly where your money goes is the first step to bringing your actions in line with your goals.
Once you’ve tracked …….