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.
6 Money Moves to Make Before the End of the 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 some 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.
If you’d rather not craft your own goals, you can use our step-by-step guide to setting financial goals you can actually attain.
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 like You Need a Budget or Mint, you likely have access to graphs that show how much of your income went to specific spending categories, like 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 your expenses, you’re ready to move on to the next step.
3. Make a Budget That Works — Finally
Listen, we know a lot of people don’t bother with a budget. We surveyed 1,500 Penny Hoarder readers in April 2019 and found that 40% of them didn’t have a budget.
But you really, really do need a budget. This post outlines five good reasons you should have a budget, including finally breaking the paycheck-to-paycheck cycle and identifying where you’re overspending.
If you’ve never set up a budget before, read this step-by-step guide to budgeting for beginners.
We’ve also outlined eight of the most popular budgeting styles. Look for one that best matches your needs and personality.
Our motto: If it works for you, then it works.
4. Pull Your Credit Reports and Examine Them for Errors
When you go over your credit reports with a magnifying glass, here’s what you might find:
- Accounts that aren’t yours. It’s possible you have accounts on your credit report that actually belong to someone with a similar name. Do you, Karen Smith, really want to have the overdue Dillards’ charge card belonging to Karen Smythe on your credit report?
- Accounts you didn’t realize were delinquent. Maybe your dentist’s office repeatedly sent the bill to the wrong address until the unpaid bill wound up in collections, leaving a giant black mark on your credit report, and you weren’t aware of any of this until your application for a car loan or mortgage was turned down.
- Outdated or incorrect information about your accounts. Perhaps you paid off a loan last year that’s still showing up as unpaid, or your credit card balance is listed as being much higher than it’s ever been. These could significantly ding your credit score, and those three little numbers hold a lot of power over your ability to access credit in the future.
All of these errors can be disputed by contacting the appropriate credit bureau. Here’s how to do it.
5. Make a Plan for Retirement and Stick to It
We don’t have to tell you that a lot of people have not saved up much for retirement.
Instead of becoming yet another statistic, why not make 2022 the year you finally take retirement seriously?
We broke down the process of retirement planning into a five-step guide that’ll help you get started.
The first thing you’ll need to decide is which kind of retirement account you want to set up. If your employer offers a 401(k), make sure you’ve signed up for it. And if your employer offers a 401(k) match, contribute at least enough to take full advantage of it. After all, that match is part of your compensation. You’re entitled to it!
And if you’ve left previous jobs with 401(k)s, roll them over to your new retirement account.
If you don’t have access to a 401(k), you’ve still got options, including IRAs and Roth IRAs. This post has a list of questions you should ask yourself when trying to decide among them.
Once you’ve got your retirement account set up, contribute to it on a regular basis. It doesn’t matter if you can only put in $25 a month — it all adds up.
6. Celebrate Your Wins!
While we’ve been talking about how to do better going forward, we also know you probably accomplished some things to be proud of in 2021.
Maybe you started a side hustle that helped you make ends meet. Maybe you managed to save quite a bit of money? Or maybe you started educating yourself about personal finance — after all, you’re here, aren’t you?
Take a few minutes to think about what you’ve done in the past year that you’re proud of, and let it sink in.
And now remember that feeling throughout the coming year, especially when you encounter setbacks (because you inevitably will). Trust that if you stick to your plan, you’ll experience that sense of satisfaction again this time next year.
Molly Moorhead is a senior editor at The Penny Hoarder.