5 Steps for a Financially Healthy New Year
Sponsored by Affirm
2022 is right around the corner. One of the things I love about the New Year is that it is a great opportunity for a fresh financial start. I reflect on how the past year went and what I’d like to do differently in the coming year. I think about the highlights of my year - what I liked having and doing. Then I can incorporate this reflection into next year’s financial plan.
While this reflection and plan is really powerful, financial well-being is about a lot more than our plan. It’s about the consistent actions we take - the habits we build.
Whether you have made great headway this year in your financial life or feel like your financial wellness is in dire need of some love, the New Year is the perfect time to build new healthy financial habits. I have you covered. Here’s what you need to do (and what I’ll be doing) for a financially healthy New Year.
Step 1: Get Clear on What’s Important (and What’s Not).
Ahh, our values. It’s really easy for our spending to be on autopilot. We might have recurring payments on services we’re not using or we spend money on things because it’s what we’ve always done, even if it’s not really adding value to our lives. On the other end, there might be things you’ve really wanted to splurge on or invest in. Make that happen in 2022.
This type of reflection takes time but it is worth it. Look back at your spending for the year. A lot of credit cards will give you a summary by category, but you can also look through your statements. You can also reflect as you’re going about your day and making purchases. Ask yourself the following questions:
Does this purchase feel worth it to me? Does it bring me joy?
Is this something I’d want more or less of in 2022?
Is this purchase supporting a company that aligns with my values and makes good choices?
Start keeping a running list of notes on how you’d like to adjust your spending and lifestyle for next year.
Step 2: Create a Budget.
When you have a better idea of what you want your year to look like, it’s time to incorporate it into a budget. Budgets get a bad rap, but they’re just a plan for how you will allocate your income to your expenses and goals. If you don’t already have a budgeting template that you love, I have a template for you.
Map out what your income and expenses will look like each month in 2022. I also include a section for my goals. If our income (the amount that hits our bank account) minus our expenses (and goals) equal zero or more, the plan is workable.
Step 3: Smooth Out Large Costs.
Even with the best laid financial plans, large irregular expenses can throw things completely out of whack. Large is relative and could be anything from a significant purchase to an annual subscription. If we have to pay for these larger expenses all at once, we might have to put them on a credit card or pull money from savings to cover them.
Luckily there are tools to help. You can of course set up a sinking fund on your own, or you can pay over time with a tool like Affirm. Affirm will be rolling out a new debit card, Affirm Debit+, the first U.S. debit card that unlocks pay over time functionality.
How it works: The card works like a typical debit card but for qualifying purchases (over $100) and subject to eligibility, you can use the Affirm Debit+ app to set up a pay over time transaction and the best part is that it’s interest free. I’ve partnered with Affirm because what you see is what you get. If you choose to budget an expense using Debit+ to pay over time, you’ll pay no fees and no interest. Sign up for the waitlist here.
Then, you’ll just want to make sure to add the new payments to your 2022 budget so it’s all included there.
Step 4: Pay Yourself First (i.e. Prioritize Your #1 Goal)
When we wait to see what’s left over to save or go towards our financial goals, there’s typically nothing (or not much left). In order to prioritize our goals, we need to pay ourselves first and treat saving and investing like an expense.
If you have been wanting to save or invest more, this year can be different. Set up an automatic deposit or transfer to a separate account dedicated to a goal of yours. Treat it like an expense. Make sure the amount works with your budget above.
If your budget doesn’t look how you’d like and you aren’t sure how to make any savings work, start small. Set up a transfer for as little as $5 per paycheck to see how it feels. From there, you can up the ante.
Step 5: Stay on track with Money Parties
It’s a huge accomplishment to set up a plan and that’s worth celebrating. Check in on and update your plans throughout the year to help them become a reality. Otherwise, all they are is plans. To help yourself stay on track, introduce money parties into your routine.
Money parties are time we set aside to show our money some love. If we don’t set aside time, it’s easy to put off taking action in our money lives. At your money party, look at what happened that month financially. How much did you earn and spend? What did progress toward your goals look like? Is there anything on your financial to-do list that you need to tackle? Our comprehensive money party guide will help you get started.