Creating Your 2022 Spending Plan

With a new year just around the corner, it’s a good time to think about your financial goals for 2022. Would you rather clean your bathroom than think about your finances? You’re not alone! Many people feel overwhelmed by budgets, spending plans, debt, and savings. You can be the boss of your finances, reduce or eliminate debt, and have a better understanding of where your money is going by using simple tools like a budget or spending plan. The word budget seems to make people uncomfortable; it seems restrictive or punitive. A spending plan, on the other hand, has a more positive connotation. Most people enjoy spending money! Spending plans take your budget a step further: where do you want the extra money to go? Are you saving for a home, college tuition, a vacation, an emergency fund? Don’t forget to save for retirement! A spending plan allows you to set goals for how you want to spend your money in the short and long term. When creating a spending plan, add a category for savings. Set a minimum amount or a percentage of your household discretionary funds to put into this category weekly, bi-weekly, or monthly. Challenge yourself each year to increase the amount you contribute to savings, even if it’s only a few dollars each pay period. Your values determine your goals. Look at bank and credit card statements to get an idea of where your money is going. If there is a category where spending is high, are you OK with that, or can you redirect spending in that category to meet a goal? If you’re comfortable with the spending in that particular category, look at other areas to see where you can make adjustments to meet other goals. Think about expenses that may be ending, like a car or student loan. Maybe you’re no longer commuting to work because your home is now your office and you can redirect money you spent on transportation, lunches out, and dry cleaning to meet other goals, like increasing your emergency fund, retirement, or debt reduction. Find an accountability partner who will keep you on track. That could be your spouse or partner, your friend, even one of your children—this is a great opportunity to help your children navigate their finances and set goals, even if they only have birthday money or an allowance to manage. It’s motivating to have another person to bounce ideas off, or keep you honest when you’re thinking about blowing more money than you can afford and sabotaging your budget. Acknowledge upfront that the early days of budgeting and using a spending plan can be challenging, but don’t give up. If the first budget tool you choose is too complicated, find another. It doesn’t have to be fancy, it just has to work for YOU! And like riding a bike, if you fall, dust yourself off and get back in the saddle. Avoid situations that cause temptation: maybe unsubscribe from emails about retail sales or bring your own coffee to work, if those are categories where you feel you’re overspending. Have a clothing swap with friends: everyone brings an item they’re no longer using, and everyone goes home with something new to them and even better, free! Taking these steps will give you more control over your finances, reduce your level of stress, and allow you to reach your goals with a plan in hand. Happy 2022!