You know, I originally wrote this piece last year in the hopes that 2021 would be better than 2020.
But in a lot of ways, 2021 was just a continuation of what 2020 had been—lots of people not being able to catch a break.
In some respects, it has been a better year. And forever the optimist, I believe 2022 is going to be even better than 2021.
Let me be clear that 2022 does NOT have to follow the same pattern as 2021.
And the best way to make sure that doesn’t happen is to focus on things that are in your control.
2022 is only 3 months away (how did that happen???) and it is absolutely within your power to make it your best financial year yet.
Here are 10 things that you can control and change to do just that.
1. Invest In Yourself
In 2020, the job market may have been one of the things that changed the most. In 2021 it continues to evolve as people figure out exactly what they want to do with their lives.
During this pandemic, I found that employment fell into four separate categories. We have people that:
- Are still employed
- Are still employed but are now working from home
- Were furloughed or laid off but were able to find a different job
- Were furloughed or laid off and are trying to make ends meet on unemployment
Regardless of what category you fell in, all four categories experienced major changes and it was not an easy ride for anyone. During that time, a lot of people did some soul searching to see if what they were doing—or had been doing—was what they actually wanted to do.
That soul searching and thinking about where you currently are in life continues to this day.
That means there is no better opportunity to invest in yourself than now.
Investing in yourself is like investing financially. The best time to start was yesterday, but the second-best time to start is right now.
The best part is that investing in yourself does not have to cost money. Some just cost a little bit of time.
There are blogs for finances (like this one!), fitness, coding, baking, cooking, interviewing, and just about any other skill you’d like to learn.
Depending on your goals, taking an online class to learn a new skill will make you more marketable for a potential promotion or new job.
You can spend a little bit of money to buy some books to learn some new financial skills like budgeting or investing. Listen to some TED talks for some inspiration.
You can find YouTube channels and blog posts to help you get or stay fit as well.
Decide what you want to do to invest in yourself, and then go for it.
2. Start a Budget—But Not Just Any Old Budget
Budgeting is the root system of your financial tree. That’s why my book is called The Root Budgeting System (Amazon link).
The Root Budgeting System focuses on helping you build a budget that is right for you.
It’s not following someone else’s blueprint that they have for their life. It’s creating your own blueprint and following that.
The last thing you want to do is budget the same exact way someone says you should.
The exact principles I use may not work for you. The exact principles Dave Ramsey uses don’t work for me and may not work for you.
Create your own budget and watch how easy and natural it is to stick with. You can do that in five simple steps.
- Start with the basics. Gather your income and expenses and see how much cash flow you have right now.
- Learn the Three Pillars. The three things or pillars that every budget needs are automation, tracking your spending, and an emergency fund. After those two steps, you start making your budget your own instead of someone else’s.
- Find and incorporate your values. This is your show. Identify what you value and implement those values into your budget.
- Choose budgeting principles that make sense for you. Give every dollar a job…but only if you want to (I don’t). If a particular budgeting principle doesn’t work for you, don’t use it.
- Set up a Frequency Budget. Within your Root Budgeting system, you can break your budget down into smaller, paycheck-sized frequency budgets so you know exactly where the money for your bills will come from.
It’s not enough to just “budget” and call it a day. If you’re trying to budget in a way that won’t work for you, you will burn out and quit.
At the same time, if you feel limited by you’re budget, you’re budgeting wrong.
I’ve been there many times and it’s ok to have to start again. Create a Root Budgeting System for yourself and it will be the last budget you ever need.
3. Invest Your Money
There are a lot of people that tend to shy away from investing because of fear or lack of knowledge. I can help with that!
The absolute best way to invest is to focus on the long-term, invest a regular amount consistently, and invest in very low-cost index funds.
You don’t have to complicate it beyond that. No need to worry about timing the market.
Index funds follow a specific index as a whole rather than individual stocks. An index is simply a group of stocks such as the S&P 500 or Dow Jones Industrial Average.
Index funds have consistently beaten out managed funds and they are the closest thing to “set it and forget it” as you can get in the stock market.
History has proven that the stock market is always on the rise if you look at it from a long-term perspective. In fact, over the past 20 years, the S&P 500 index has averaged a yearly return of 8%.
That means that if you invested money in an index fund that followed the S&P 500 in the year 2000 and just left it there, the amount of money you would have today would be as if you were getting an 8% return every year on your investment.
That 8% yearly return even takes into account the stock market plunge after the September 11th attacks and the Great Recession that started at the end of the 2000s.
That’s pretty impressive!
The market definitely goes down but it’s nothing to fear. As long as you keep your money in the market and think long-term, you will recover what you lost and then some.
Besides, buying into an index fund when the market is low is like buying stocks on sale!
4. Take a Look at Your Tax Situation
Many people love getting a tax refund, but that’s not the only way to do things.
I’m sure you’ve heard before that overpaying your taxes is giving an interest-free loan to the government.
But I fully understand that for some people getting a large tax refund helps them save for vacations, purchase large items, or pay off debt.
What if I told you that you can have the best of both worlds, and by getting the best of both worlds, you can actually have more money than if you were to get a refund every year?
Here is the simple process to still feel like you’re getting a refund while at the same time earning more money than your normal refund.
- Adjust your tax withholdings with your employer to get your refund split between your paychecks during the year.
- Set up an automatic transfer or direct deposit into a high-interest-earning online savings account for the extra amount you have on your paycheck.
- Sit back and watch while the money that was going to be stuck with the IRS continues to grow.
Now after a year—the same amount of time between tax refunds—you will not only have your refund money like normal, but you will also have the interest you’ve earned on that money.
If you usually don’t use your refund money for anything, this method can also be used to deposit more into your investment accounts or to simply give yourself some breathing room in your finances.
I have an article that goes in-depth into the process I used to change my withholdings. As always, it’s best to talk to a tax professional before making any changes.
I bet you won’t complain about a bigger paycheck though. 😉
5. Set a Goal…
What do you want to accomplish next year in your finances?
Do you want to earn more money? Do you want to learn how to budget?
Is there a money mindset issue you want to work on?
One of the best things you can do is to set a specific, lofty goal for what you want to accomplish.
Why lofty? Two reasons.
First, setting a goal that may be difficult to reach encourages you to put more effort into reaching that goal.
Second, even if you don’t attain the goal completely, you are all but guaranteed to still come closer than you would have if you set a lower goal.
Think of it this way.
If I were to set a goal for myself to dunk on a seven-foot-high basketball hoop, I would put enough effort into making that goal.
I’m almost six feet tall, so unless something went horribly wrong, I would be able to attain that goal.
But what if I were to set a goal of dunking on a ten-foot basketball hoop? I would put in a lot more effort to try and jump that high.
I may not make it that goal, but I would get high enough to be able to dunk on a nine- or nine-and-a-half-foot hoop.
That in and of itself is higher than attaining a goal of dunking on a seven-foot basketball hoop.
Setting lofty goals also gets your brain asking questions on how to accomplish that goal.
Aim your goals high and you will be able to do more than if you were to set a lower goal.
6. …And Then Set Milestones on Your Way to That Goal
Setting a lofty goal is a great thing, but there is something you can do to help you reach that goal regardless of how high it is.
Set milestones for yourself.
Think of a milestone as a smaller goal that helps you get to your larger goal.
They are like guideposts on the trail—smaller tasks that you can do to help you stay in line with your overall goal.
For debt payoff, some of these milestones might be:
- setting up a budget to know how much extra money you have;
- figuring out how much per month you need to set aside to get all your debt paid off in 24 months;
- celebrating after each credit card is paid off
For a goal of learning to stick to a budget, some milestones might be:
- After two months, you’ve only had to find money to cover overspending on three categories
- By the six month mark, overspending is rare and you’ve set up an automatic transfer for saving
Determine what our milestones are going to be for your specific goal. It’s basically reverse engineering your goal to make it easier to reach.
7. Cut Things Out of Your Life that Don’t Work
One of the best things you can do to give yourself a great 2022 is to cut anything out of your life that isn’t working for you.
These can include clutter, relationships, spending, debt, bad food, clothing that doesn’t fit or is too old to keep, finance advice, discouragement, types of budgets, or anything in between.
Removing the things from your life that don’t matter cuts the weight trying to hold you down in whatever you are trying to accomplish in life.
A lot of things you can cut out have either a direct or indirect connection to your finances.
For example, cutting out clutter or relationships that are bad for you can lift a lot of weight off your shoulder.
This “lighter” feeling gives you the clarity to make the decisions you need to make in your finances.
Cutting things out that are not working is no reason to feel bad either. You may think you failed or did something wrong.
We have all been there. I struggle with it at times too.
Sometimes I’ll mumble to myself, “well that was a waste of time” or “that was a waste of money” when in reality it wasn’t.
Any failures in your life are valuable lessons that actually bring you closer to your purpose.
When you fail, you gain valuable insights on things that both work and don’t work.
When you move on to the next goal you’re trying to accomplish, you have an advantage because of the things you’ve learned from your failure.
Cut the things out of your life that don’t matter, and start with discouragement.
8. Look to Increase Your Income
Whether you currently have one stream of income or a few, it’s worth increasing your income all-around to give you more financial security and reach your financial goals faster.
There are four ways to do this. You can:
- Get promoted at work.
- Get a raise at work in your current position
- Search for a new job
- Start a business
Let’s quickly look at these one by one.
1. Get promoted at work.
Set up a meeting with your boss and discuss what specific skills or abilities you need to develop to become a top candidate for any open positions.
Then take action to develop the skills you need to become a top candidate for the role you are looking to attain.
Take a little action every day to help you learn the skills and abilities you need to gain the role.
You can even see if your boss will help you create a development plan with a specific time of when you would like to get promoted.
After that, the only thing left to do is to apply for the open position! The skills and abilities you learned for that new role will make you a great candidate to the interviewer.
2. Get a raise at work in your current position.
Many of the same advice for landing a promotion can work well to get a raise in your current position too.
Some of the best advice I have found is from Ramit Sethi. Ramit gives some great advice on his website and in his personal finance book, I Will Teach You to be Rich.
The number one thing you want to do is become a top performer. Start now to go above and beyond.
Focus on what you can do for your employer, rather than what they can do for you. I guarantee this is what your boss will be focusing on as well.
Show your boss what you have already accomplished for the company. As Ramit suggests, start tracking the results of things you have done to contribute to the company.
I did this when I interviewed for a team lead position at my job. I kept track of projects I had been a part of and success stories helping coach the team.
Schedule a meeting with your boss to discuss what you need to do and the time frame you want to do it in. Then, become a top performer in the company and increase your income!
3. Search for a new job.
One of the best ways (and sadly, sometimes the only way) to increase your salary is to get a new job.
Search LinkedIn and websites like Indeed.com for open positions in the field of your expertise.
Have someone you trust, or a hired expert, review your resume and give it the best possible shine.
When you interview, keep in mind it is not about you; it is about what you can contribute to the company where you are applying.
Research the company to know the position. Have solid examples from past jobs that show you can succeed in the role you are applying for.
Address concerns they may have head-on in the interview. You can even roleplay a fake interview with a friend to practice answering interview questions off the internet.
Remember, the interview is your first impression, so you want to make it an extraordinary one.
4. Start a business.
Let’s get this out of the way first. Side hustling is not everything. There has been a lot of glorification in recent years on side hustling.
Side hustling is not a great long-term solution because it is essentially working two jobs, even if it’s doing something you love.
That being said, it is a great way to earn some extra income, especially if you take it full-time someday.
To start a side hustle, examine the skills that you have outside of work.
Are you a musician? Make music and sell it. You could also teach others your craft.
The same can be said of many skills. If people find it valuable, they will pay you to learn it.
When people start paying you for what they value, that is when you have a business, even if it is just a small one.
Side hustling is another great way to use your college education if your full-time job is not in your field of study.
Maybe you majored in Spanish in college. Could you start a side hustle tutoring students in the language?
You bet you could!
Examine your hobbies and skills and come up with a service or product to sell. It does not have to be much to bring in a little bit of extra money.
9. Find and Focus on Your Why
Why do you want to accomplish what you want to accomplish? Why do you want to be in a good spot financially?
I’ve found that specifically chasing money is never the way to go.
It can turn you into something you’re not and it can prevent you from starting toward your goals until you “have enough money.”
Instead, focus on why you want more money.
For me personally, part of my why is more generosity. Right now, I love that we are able to bless people with meeting small to medium-sized needs or even just providing for a meal or two.
In the future, I will enjoy paying for large needs for people as well. I already enjoy blessing my friends and family with the money I have currently, but I want to keep growing to give more.
I also value freedom.
Being financially in a good place buys freedom. When you’re trapped in unnecessary debt or living paycheck to paycheck, it can keep you in situations you don’t want to be.
I want to be financially set so I don’t have to worry about what comes my way and I can have the freedom to do what I want with my time.
Those are a couple of my why’s. What are yours?
Determine your why and then go after it. Keep it in the front of your mind and watch your motivation skyrocket.
Here’s a TED Talk by Simon Sinek to help you get started as well.
10. Automate EVERYTHING
Automation is such a huge thing in personal finance that I call it one of the three pillars of budgeting.
Automate everything in your personal finances.
Automate your bill paying, your income, your investments, and your saving.
You can automate your bill-paying through your bank or through the online portal of the company you’re paying. This helps you never miss a payment again.
Set up direct deposit through your employer so you don’t have to worry about going to your bank anymore. You no longer have to wait for checks to clear either as your paycheck money will be available either on payday or the day after.
One of the best ways to start saving and investing more is to automate the deposits into those accounts.
If you never see that money in your checking account, you are much less likely to spend it.
Then when you pull up your saving and investing accounts, you will see some real growth and be encouraged!
The last thing automation does for you is make managing your money nice and easy. You are more likely to stick with a budget if it’s easy to do.
Cutting out paying bills manually, running to the bank, and trying to get your money where you want it to go will literally save you hours of time.
Set up automation everywhere.
Here’s to an Amazing 2022
2022 is only three months away.
There are ten things in this article you can do to make next year your best financial year yet. Use as many of them as you are able and start now to get a jump on next year.
The best part is none of them depend on how this year went for you! That’s great news since a lot of us haven’t recovered yet from 2020.
I believe both my next year and your next year are going to be as bright as the sunshine.
And you have the power to make it a great one.