As prices rise and budgets are squeezed tighter, it makes sense to give your finances an overhaul. If you want to make the most of your income, here are a few suggestions on how you can save, invest, and get smarter with money in 2022.
Calculate Your Net Worth
To improve your finances, you need to know your start point. This begins by calculating your net worth. This is basically your assets (the money you have including savings and investments plus any property or other valuable items etc.) minus your debts (student loans, other loans, credit card debt, mortgages, etc.). Doing this every month can be a great motivator as you pay down your debt, increase your savings and assets, and watch your net worth grow. Plus, if you notice a drop, you’ll be able to see what you need to do to get back on track.
Work Out What You Need for Your Retirement
It’s never too early to save for retirement but to save effectively, you need to have an idea of how much you’ll need to support yourself when you finally stop working. This will form the basis of how much you need to put into your 401(k) or IRA, both of which allow investors tax deductions or deferrals for investing for your retirement.
Contribute More to Your Roth IRA or Open One
Roth IRAs allow you to contribute money after you have paid your taxes on it. The contributions and earnings grow tax-free as you have already paid the taxes. If you’re under 50, you can contribute $6,000 to your IRA in 2022; if you’re over 50, you can put in $7,000.
Invest in an Index Fund
If you’re new to investing and have a hundred dollars to spare, try putting your money in an index fund like the NASDAQ. It’s a good solid vehicle for newbies as the fund is designed to track the whole stock market rather than individual funds as it’s a strategy for wealth building.
Rental Property Shares
Retirement accounts are the perfect vehicle for investing in real estate. You can use your self-directed IRA retirement funds to buy properties instead of the more traditional route of putting your money in stocks and bonds. By making a self-directed IRA real estate investment, you’ll get to keep the most of your gains.
Monitor Your Accounts
Take steps to protect your accounts. If you’ve done the net worth exercise you should be aware of all of your accounts and where they are. Now, you need to ensure that they’re secure. Turn on multi-factor authentication, set up credit report monitoring and make sure that all your passwords are secure. Don’t risk losing all your hard-earned cash.
Improve Your Credit Score
Improving your credit score will stand you in good stead should you wish to apply for more credit in the future or secure a mortgage. To improve your score, be sure to pay your bills on time every month and keep your credit utilization rate under 30% of your total credit limit.