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Be Smart with Your Money: How to Get Financially Fit in 2022

The start of a new year is the perfect time to reassess how you’re doing in pretty much any area of your life. For example, January is the best revenue month for gyms because many people choose to prioritize physical fitness. The flip of one year to the next puts people in the right frame of mind to make a change for the better.

We believe that everyone should have the same mindset regarding their financial fitness. That’s why we put together a list of the best things you can do to become financially fit in 2022 and the trends that might impact your decisions.

3 Important Banking Trends for 2022

Before finding ways to improve your financial fitness, we first must look at what’s happening around us that could impact our decisions. This gives us a good indication of the direction we need to go and the choices we need to make to reach our financial goals. We’ve identified three banking trends that may impact how you choose to get stronger financially.  

woman at laptop with dog

Trend #1 – Inflation may not go back down 

Inflation has grown quite a bit over the past year. As the country attempted to recover from the pandemic, the supply chain suffered. It has been more difficult to import goods or find workers in certain areas, like the trucking or transportation industry. This has aided the inflation climb, making things like gas and food cost more than each did last year and especially more than our previous “normal” year, pre-pandemic. 

As we look forward to 2022 in its entirety, there are no signs that inflation will come back down. That means that people will either have to go without certain items, or they’ll have to adjust their budgets to find a way to afford the things they believe they need. Regardless of choice, inflation staying high means that everyone needs to be better with their finances or take a huge hit.

Trend #2 – More consumers are looking for ease of use in financial management

According to a Northwestern Mutual study, the younger generations are more goal-oriented, especially with their finances, than other generations were at their age. However, 57% of Gen Z reports not even knowing how much they have in their savings account. Plus, 69% of this population feel like they don’t have clarity on how much they can spend now versus later. That’s a large chunk that is looking for an easier experience to help manage their finances, and many are looking for a banking switch. 

Credit unions and FinTech startups continue to dominate the younger, working-age groups for regular banking because the fee structure is better, and they aim to help the consumer by making finances easier. If inflation holds it will become even more difficult for anyone to pay fees and be able to keep to their budgets, and the uncertainty in the world is only driving consumers to look for shortcuts in dealing with things they don’t enjoy, like their finances. 

Trend #3 – Consumers continue to brace for the unexpected 

While spending may not have taken a significant hit during the 2021 holiday season, consumers aren’t overly confident in the long-term economy. Financial debt is larger than it’s ever been, especially debt for things that people consider to be must-haves like college, houses, and cars. More consumers than ever are preparing for an uncertain future by not purchasing homes or delaying having kids. 

The pandemic hit many small businesses and individual consumers hard. It changed the way many people think about their finances, and it could have a lingering effect on financial decisions. 

If you want to be in control of your financial future instead of being in a position just merely to respond to what’s happening, it’s important to find the right path forward. That’s why we’ve put together six ways you can become more financially fit and put yourself in a position to reach your financial goals in 2022 and beyond. 

6 Ways to Build Financial Muscle in 2022

Now that you know what might impact you personally throughout the year, let’s dive into the best ways to become more financially fit and independent in 2022. Keep in mind that some of these opportunities might be a good fit for you and some may not, depending on your situation, but each has a great benefit to your overall financial health.

checking numbers

1. Stick to a Budget

There is a reason that creating and sticking to a budget has been a long-time staple of pretty much every financial guru that ever existed. You can’t have control of your finances if you aren’t watching where you’re spending your money. Beyond just watching your expenses, it’s important to predict and plan on where every dollar you make should go. 

One of the great benefits of having a budget is that you can use that plan to accommodate the current burden of inflation. Adjusting your budget to get rid of things that aren’t a necessity or adjusting what entertainment or even banking fees you’re paying can help you cover the increased costs of food or other expenses. 

2. Get Out of Debt First

Before you start spending money on extra things or investing your money to make it grow, it’s important you get out of debt. The question most people have is, “What does out of debt really mean?” So many people have student debt, car debt, or house debt that they don’t feel like they’ll ever get out from under any of it. 

woman and cat

What we mean here, though, is excessive debt. Credit cards, personal loans, and car loans are all excessive debt because they aren’t investments. Taking those monthly payments away will allow you to either invest or double down on your student loan payments so that you can rid yourself of that burden. It is difficult to truly be financially free while you’re still paying on debt where you barely make a dent in the interest every month. This should be a top priority for anyone with this type of debt. 

3. Invest a Portion of Your Savings

As you’re creating a budget, it’s important to set aside some of your monthly income towards savings. There are typically three ways to save: 

  1. Put money away for a rainy day.
  2. Save for specific purchases, like a vacation or a car. 
  3. Invest some money into safe investments like real estate, bonds, or mutual funds. 

Investing a portion of your money every month through a retirement account or via the stock market is a good way to grow your wealth. There are large numbers of people every day who reach retirement age but aren’t ready for the financial costs associated with retiring. It would help if you made investing a priority so that your wealth grows over time and so that you get to enjoy your golden years. 

4. Create an Emergency Fund

With the rest of your savings, you should create an emergency fund. You can’t predict what’s going to happen, and if the last couple of years has taught us anything, we aren’t always pleasantly surprised. Those who were negatively impacted by the pandemic but had an emergency fund were much more likely to get out of the situation without a large financial hit, like bankruptcy or a significant drop in their credit score. 

The good news is that you don’t have to save much every month as you build up an emergency fund, and you can start investing the excess funds once you reach your goal. The amount you save should be according to your comfort level. If you were to lose all income tomorrow, how much would you want to have on hand to feel secure? That’s the number you need to aim for. 

woman standing at desk

5. Diversify Your Income

In the history of the world, it has never been easier to diversify your revenue than it is right now. Diversification in your financial portfolio means receiving monthly income from multiple sources, not just from a single source like your job. That way, if something happens to one of your income sources, you still have something coming in to sustain you until you replenish your losses. 

There are several ways to do this, including: 

  • Freelancing
  • Investing in dividend-paying stocks
  • Using an app, like Airbnb or Uber, to earn some extra cash
  • Getting a second job
  • Starting a side-gig or business
  • Doing odd jobs in your community

The best way to find the right income streams for you will depend on your skills and the demand of your current job. Begin by brainstorming everything you could do that people would pay for and find some good options that might work for your unique situation. 

6. Audit Your Household Spending

Many people accept their monthly household bills as “needs” when in reality, many are not. The average household spending slowly increases over time as we sign up for streaming services or other entertainment that we don’t use consistently. It’s a good idea to take a hard look at everything you’re spending money on every single year and eliminate the stuff you can live without. 

woman sitting on exercise ball

Bottom Line

As you can see, there are several things you can do to get financially stronger in 2022 than you were last year. Many of these tasks are things you should either audit annually or keep up with every month. Making your finances a priority this year will make you stronger, and just like your physical fitness, it will give you more confidence no matter what comes your way.