5 Steps to Strengthen Your Finances in 2022 | Smart Change: Personal Finance | wcfcourier.com – Waterloo Cedar Falls Courier

5 Steps to Strengthen Your Finances in 2022 | Smart Change: Personal Finance | wcfcourier.com – Waterloo Cedar Falls Courier

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

2021 was a year of financial strain for many Americans: Household debt and the overall cost of living increased, while median household income decreased, according to NerdWallet’s annual household debt study. In 2022, setting grand financial goals may not be realistic for every budget, but there are still smart steps you can take to shore up your finances.

1. Examine your spending

Household finances have changed drastically for many Americans over the past two years. Pandemic relief and stimulus programs — as well as the reduction of certain expenses due to pandemic restrictions, like commuting and travel — may have added money to some budgets. On the other hand, according to NerdWallet’s study, the overall cost of living has grown 7% over the past two years while median household income decreased 3% in the same span, putting the squeeze on many Americans.

People are also reading…

A new year is an ideal time to examine your budget. Don’t have a budget? Start by pulling your bank and credit card statements for the past three months and adding up your spending in different categories — housing, food, utilities and so on — to see what an average month looks like for you. Knowing how much you’re spending now is key to creating a realistic budget for the future. Without this step, you might assume you should budget, say, $300 a month for groceries, but if you’re currently spending $600 a month at the supermarket, it’s probably not realistic to cut your spending so quickly by so much.

Once you’ve built a budget, compare your expenses to your income to see how much room there is to progress toward financial goals like saving and investing. You can then determine whether you need to increase your income, decrease your expenses, or both. Based on your eligibility, you might also consider seeking out programs to help you make ends meet, like an income-driven repayment plan for your student loans or the Supplemental Nutrition Assistance Program, or SNAP.

2. Add a little more to your consumer debt payments

Revolving household credit card debt — that is, credit card balances carried month to month — fell 14% over the 12 months that ended in September. But according to NerdWallet’s study, some Americans leaned on their credit cards to get through the pandemic. One in 5 Americans (20%) say they increased their overall credit card debt during the pandemic. Almost the same proportion (18%) say they relied on credit cards to pay for necessities during this time, according to the survey conducted for NerdWallet by The Harris Poll.

If you have a credit card balance and you don’t feel like you’re getting anywhere in paying it off, adding just a bit more to the monthly payment, if possible, can make a big difference.

Say you have a credit card balance of $5,000 at 17% interest, and your minimum monthly payment is $75. If you paid only that much each month, it …….

Source: https://wcfcourier.com/business/investment/personal-finance/5-steps-to-strengthen-your-finances-in-2022/article_dbd76b75-6824-510d-9e3a-5ab851a886ed.html

Personal finances