12 Money Goals for 2022
OK, so maybe I’m a little late to the new year resolutions, but there’s still half the month left. Here are 12 things (only one a month!) that you can accomplish this year to improve your overall financial picture.
1. Get your Free Annual Credit Report
It’s a good idea to check your credit report at least every year. There may be things on there that are wrong or outdated. In a worst-case scenario, you might find accounts that have been opened fraudulently in your name. Given the growing problem of identity theft, regular review of your credit report is a good thing to do.
By law, you are entitled to one free credit report from each of the three nationwide credit reporting agencies every 12 months. You can access your credit reports here. At the same time you are checking each of your credit reports, you might also consider putting a lock or a freeze on your credit at Equifax, TransUnion and Experian. This means that no one can inquire on your credit, or open credit accounts in your name without the freeze or lock being temporarily removed.
2. Make sure your beneficiary designations are up to date
Certain of your financial accounts (such as brokerage accounts, 401ks, IRAs, etc. have beneficiary designations which govern who inherits those accounts the event of your death. Your designated beneficiaries will receive those accounts directly without those assets being included in your probate estate. Given that probate can be a lengthy and expensive process, it is efficient estate planning to make sure that a) you have designated beneficiaries for your accounts and b) they are up-to-date. So if you’ve gotten married or had a child recently, you may want to update your beneficiaries.
3. Make this the year you establish or re-visit your estate plan
This is a tough one, because it takes time and involves some upfront costs regardless of whether you get a lawyer to draw up a basic will and advanced medical directives or you take the DIY route and use an online tool to do it. It also involves unpleasant discussions about what happens when you die. Who will take care of your minor children? How do you want your assets to be distributed? These are tough questions without easy answers, but they are important to address. If you do not have an estate plan, the state will provide one for you, but it may not be the one that you would have wanted, or the one that is best for your heirs.
4. Bump up your retirement contributions
The IRS has increased the annual contribution limits for 401k plans by $1,000 for 2022 to $20,500. If you are not maxing out your 401k already, perhaps considering upping your contribution by 1%. You probably won’t notice the difference in your paycheck, especially if you are also receiving a pay raise for 2022. The contributions add up over time. If your employer offers a match, you should at least be contributing enough to get the entire match. Don’t leave free money on the table.
5. Automate your saving and investing
I think one of the best, but least heralded financial innovations of the past 20 years is automation. I have an automated deduction from my checking account to my brokerage account every month. Automation overcomes our natural tendency to inertia. If you had to write a physical check every month and send it to your brokerage account, you would be much less likely to do it. I also have an app on my phone that’s connected to my credit card, which “rounds up” every credit card purchase I make and deposits the difference into an investment account (so if I spend $15.25, it rounds up the purchase to $16.00 and deducts 75 cents from my checking account and deposits it into an investment account).
6. Check to see if your employer offers matches for charitable giving
Many larger employers offer some sort of matching program for charitable giving. Some also have web-based portals with comprehensive lists of worthy organizations that make charitable giving extremely easy. I recently gave to a charity helping victims of the recent Colorado wildfires and my employer matched 100% of my donation. It’s an easy way to increase the impact of your charitable giving.
7. Find higher-yielding alternatives for cash
Today the Fed released inflation data. It’s at the highest level since 1980. Unfortunately, inflation is proving to be less transitory than hoped last year. Your cash is earning nothing, as you know, and now its value is being eroded fast than ever in recent memory. Nevertheless, there is optionality in holding cash, especially in periods of market volatility. If your cash is sitting in a bank savings account, take some time to research marginally higher returning options. There are a number of online banking institutions offering “high yield” savings accounts. You might also consider short-term inflation indexed bonds (TIPS). Or I-Bonds.
8. Review your insurance coverages
Somewhat less unpleasant than discussing your wills, but still not a walk in the park: take some time this year to review your insurance coverages. Make a spreadsheet or document listing each of your insurance policies (Auto, Homeowners/Renters, Life, etc.) and their coverage limits and think about whether you are carrying the appropriate levels.
9. Focus on your health
Health is wealth. Especially in the current environment, make your health a priority this year. This year I’ve been observing “Dry January” as a reset from holiday-related indulgence. Making some dietary and activity changes has large cumulative positive results.
10. Know and track your net worth
I’m not an adherent of the idea that everything in life needs to be quantified and managed. I do think that when it comes to improving your overall financial position over time, measuring and tracking changes in your net worth is an invaluable exercise. Every week, I note all of the balances in all of my accounts in a spreadsheet. This helps me understand how my financial picture has changed over time and what factors have had the largest effect on my overall net worth. You can make it as simple or as complicated as you like. My tracking is pretty granular, and from it I can track a lot of different ratios which provide further insight. On the simpler side, you can also just add up the value of all of your assets, subtract your outstanding debts, and the result is your total net worth.
11. Review recurring charges
A few years ago, I joined one of those wine delivery services. It was a great way to find new wines, and it was always nice to get a package every month. After a while, I realized how much money I was spending on wine delivery on an annual basis, and it sort of lost its appeal. Recurring charges have a way of attaching themselves to us like barnacles on a ship’s hull. It’s a useful exercise to review your recurring payments and decide if it’s worthwhile to you. How many streaming services do you need? Can you use someone else’s password instead (kidding)? Do you really read that magazine enough to justify the cost? Is your gym bleeding you dry?
12. Make a reading list
I get it. Financial and Business topics may not be at the top of your recreational reading list, but there are a lot of interesting books out there that can make you a better investor. Here is a selection that I have enjoyed over the past year:
-Barbarians at the Gate: The Fall of RJR Nabisco (Burrough/Helyar)
-How to Think About Money (Clements)
-Backstage Wall Street (Brown)
-Psychology of Money (Housel)
-Let my People go Surfing (Chouinard)