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5 Money Resolutions You Should Set for 2022

The new year is an excellent time to take stock of your finances and decide what you want to achieve with your money. Laura reviews five essential resolutions for tracking your financial progress, eliminating debt, saving more, and boosting your financial wellbeing in 2022.

By
Laura Adams, MBA
8-minute read
Episode #714
The Quick And Dirty

While everyone's financial life is different, there are fundamental financial goals that everyone should have. Start by knowing your net worth. Then, set an objective, strengthen your safety nets, and understand what you need for retirement. If you have debt, work to eliminate it so that it doesn't become a burden on your other goals.

Have you set your money resolutions yet for 2022? If not, it could be that you're not sure what they should be. While everyone's situation is different, everyone should reach specific fundamental financial goals. 

This post will cover tips for taking stock of your financial life, uncovering what you want to achieve, and how to bridge the gap between the two. You'll learn simple ways to track your financial progress, stay focused on a critical money objective, eliminate debt, and set more resolutions to boost your financial wellbeing in 2022. 

Keep reading for the details on achieving these five essential financial resolutions.

1. Know your net worth

Knowing your net worth before setting your money resolutions is critical because it helps you figure out what to aim for. It should be your first step because it reveals your overall financial health. It's kind of like stepping on the scale before setting a goal to lose weight. If you don't have a starting point or metric, it's difficult to know if or when you make progress or finally hit your goal. 

I created a document to calculate and track my net worth called a Personal Financial Statement or PFS. It's a little different from a basic net worth statement because it includes additional information that you should keep up with. You can create your own PFS on paper, a Word doc, or a spreadsheet, but if you'd like a copy of my template, you can download it at no charge when you subscribe to my newsletter for free at LauraDAdams.com.

Knowing your net worth before setting your money resolutions is critical because it helps you figure out what to aim for.

Creating your PFS isn't difficult, but gathering and recording your information takes time. Using my template, you'll find a tab for listing your assets. These are things you own that have value, such as real estate, cars, jewelry, household furnishings, sporting goods, cash in the bank, taxable investments, and retirement accounts. 

Do the best you can to assign accurate market values to your assets. You can lump lower-priced items together under categories, such as furnishings; however, be as precise as possible for expensive items. For instance, you might use Zillow.com for pricing real estate, KBB.com for cars, and eBay.com for sporting goods. Once you have your assets accounted for, add up the total.

Also, consider if each of your high-dollar assets is adequately insured. I include a section on my PFS that's just for insurance policies, including home, auto, life, disability, and personal liability. Be sure to include your insurer's name, policy number, and amount of coverage you have. Remember that as your income net worth increases, so should your insurance protections.

Below your assets, list out your liabilities or what you owe, such as mortgages, car loans, student loans, personal loans, credit cards, and balances on lines of credit. There's a separate tab for liabilities on my PFS that automatically gives you a total and subtracts it from your total assets. The resulting number (positive or negative) is your net worth.

Why is this exercise so crucial for setting money goals each year? If your net worth doesn't increase from year to year, you're not getting wealthier. Your financial well-being declines if your net worth is flat (due to inflation) or lower than last year. 

Having a higher net worth than last year means you increased your assets, decreased your debts, or both. Even going from a negative net worth to a meager net worth shows you're making progress! So taking the time to calculate your net worth is an excellent first step towards your larger financial goals.

2. Set your One Money Objective

Have you ever heard about setting a word or theme for a given year to keep you focused on what you want to achieve? It's also an excellent idea for your finances, so you set an overarching objective. I call it my One Money Objective or OMO and recommend you set one too.

While you probably have many things you want to accomplish financially, having an OMO forces you to boil down your priorities into a single word or brief phrase. 

One way to identify your OMO is to consider the 80/20 rule, also known as the Pareto principle. It says there's an unequal relationship between inputs and outputs so that roughly 80% of effects come from 20% of causes. 

Pareto was an Italian economist who found that approximately 80% of the land in Italy in the late 1800s was owned by 20% of the population. He also observed that 20% of the peapods in his garden contained 80% of the peas.

While you probably have many things you want to accomplish financially, having an OMO forces you to boil down your priorities into a single word or brief phrase.

Many businesses find that 80% of their profit comes from 20% of customers. And 80% of sales are achieved by 20% of the sales force. You get the idea. 

The 80/20 rule reveals that massive improvements can be made when you know what's responsible for most of your results. So, when you identify the most potent inputs in your work or financial life, you can have much more success with way less effort. 

I challenge you to find your 20% input and turn it into your OMO. Your OMO could stay constant for your entire life or be a "word of the year" that captures your current aspiration and gets re-evaluated next year. Identify what's essential to make dramatic improvements with your finances and double down on it. 

You may have to spend some time pondering what financial activity or concept gets the results you want more than anything else. As you create your PFS, it will probably be clear that you need to save more, eliminate high-interest debt, or protect your wealth with more insurance. I promise that seeing your net worth and entire financial life on one spreadsheet will motivate you.

Your OMO might be retirement, self-employment, financial freedom, family, or anything that will dramatically support your financial dreams. What's most important to you? Maybe it's starting a charitable foundation or not owing money to anyone. There isn't a right or wrong answer.

Another way to narrow down your OMO is by considering what's causing any financial stress. If your finances don't support your values, you probably know you need to make significant changes, which can feel scary or cause anxiety. Consider the 20% input to relieve 80% of your money stress. Maybe it's changing careers, adding an income stream, or downsizing your home. 

Successful people know what they need to do and then do it. So once you identify your OMO, don't make excuses or procrastinate. Build habits that ensure you can reach your OMO and use it as a guide when you're unsure what to do. 

For instance, if you're wondering if you should raid your 401k to pay off credit cards, ask yourself if it would support or defeat your objective. If you're considering starting a side business or going back to school, consider if it moves you closer to or farther away from your critical financial objective.  

One tip for staying motivated is creating visible triggers that remind you what you want to accomplish. You might place strategic cues in your home, car, and workplace that routinely get your attention and foster good habits.

For instance, you could write your OMO on an index card that stays in your wallet. Jot it down on a sticky note for your credit cards, bathroom mirror, car dashboard, and computer monitor at work.

Another strategy is to write a journal entry every morning about why your OMO is essential. Include what you'll do today to accomplish it and what it ultimately means for you and your family's future.

How to Stay Disciplined and Do More With Your Money

3. Strengthen your safety nets

You know that life is full of financial surprises and costly emergencies. Another critical resolution everyone should set in 2022 is evaluating and boosting your emergency fund. That's cash you keep safe and liquid in an FDIC-insured savings account.

Having a cash cushion to fall back on helps you reduce stress, navigate financial hardships, and avoid going into debt. Commit to regularly putting away a set amount, such as $100 a month or $50 a week. Even a small emergency fund is better than nothing and can be your most valuable safety net.

One tip to make saving easier is automating your emergency savings with a separate direct deposit that puts a flat amount or a percentage of your paycheck in the bank. Just ask your employer to set it up. Or, if you're self-employed, create a recurring transfer that moves money from your checking into a savings account on a monthly or weekly basis. 

If money is tight, try working overtime, getting a second job, or starting a business on the side, so you have more to save. It doesn't have to be forever—just until you reach a savings goal, such as accumulating $1,000 or $5,000. Ultimately, building a cash cushion equal to three to six months' worth of your living expenses is one of the best money resolutions you can have.

4. Understand what you'll need for retirement

It can be challenging to think about your golden years when you're a new graduate or still feel like a kid. But very few people have the desire or health to work until their dying day. So, investing for retirement is a money resolution for everyone in the workforce. 

One essential factor in how much you accumulate for retirement depends on when you start investing, even if you don't have much to invest. The beautiful thing about investing early in your career is that you lock in your ability to grow rich. Getting an early start allows your money to compound and grow exponentially over time.

For example, if you invest $250 a month with an average annual 7% return for 40 years, you'll have over $650,000. But if you start late and only have 20 years to invest the same amount for the same return, you'll only have $130,000. 

So, don't delay making investing for retirement a top money resolution. It's a huge mistake to believe that you can't afford it or will catch up later. If you wait for a raise, bonus, or windfall, you're burning precious time. You're never too young to begin planning for your future and investing for retirement.

If your employer matches some amount of 401(k) or 403(b) contributions, always save enough to get the entire match, which is free money! Your matching funds may come with a vesting schedule, but even if you leave your job without all your matching, it's money you didn't have to work for. Need I say more?

A great way to understand what you'll need for retirement and how much you should be saving is by plugging your information into a retirement planning calculator. Check out the AARP Retirement Nest Egg Calculator to understand factors that influence your financial future.

5. Create a debt elimination plan

Often, not having a debt reduction plan can be a source of stress you need to reverse. So, if you're struggling with debt or want to eliminate it as quickly as possible, make it a money resolution.

With a clear plan in place, managing debt becomes less overwhelming. A resource I created and highly recommend is my best-selling course, Get Out of Debt Fast—A Proven Plan to Stay Debt-Free Forever. It's incredibly affordable and will take you through every detailed step of prioritizing your debt, optimizing strategies, and eliminating it faster, even if you don't have extra money. 

If you have high-interest loans or credit card debt, it can be difficult to achieve financial success because it takes up so much of your income. So, don't accept expensive credit card debt as a way of life or allow it to rob you of the ability to save and invest.

If you have friends or family who spend lavishly or live beyond their means, don't get caught in the habit of caring about what they think about you and your financial life. That can trigger poor spending decisions and could be what got you into debt in the first place.

If you're financing a lifestyle that you can't afford, make sacrifices in 2022 so you can finally get ahead. Try waiting a little longer before buying something, researching debt consolidation, sticking to a budget, and focusing on getting and staying out of debt to build financial security.

Need help setting your financial resolutions?

If you have a spouse or life partner, consider creating your financial resolutions together. If you're single, consider getting together with a close friend or family member to discuss your money resolutions for the coming year. You could discuss your goals over dinner, during a walk, or on a long drive somewhere.

If you don't have someone you feel comfortable talking to or want professional guidance, make an appointment with a fee-only certified financial planner (CFP). They don't get paid for recommending products, just for the time they work on creating a realistic financial plan for you. An excellent place to find a fee-only advisor is NAPFA.org, the National Association of Personal Financial Advisors.

Use these resolutions to understand your financial health, create safety nets, cut debt, and plan wisely for the future. Here's to a Happy Financial New Year, everyone!

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.