What are your financial priorities for 2022?

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Financial planning can be one of the more stressful aspects of “adulting”.  There are always bills and credit cards and somehow life always has an unexpected expense just around the corner.  New tires?  Plumbing repair?  Holidays or birthdays right around the corner?  It seems that there is always an unexpected expense lurking around.

Bills and Savings

Managing your money is all about the in-come versus the out-go. In order to meet your financial goals, you have to either increase one side of the equation or reduce the other.

Financial Goals

Are you trying to reduce your fixed or flexible expenses in the new year?  Maybe you hope to take a closer look at your overall spending.  Is this the year you pay down your debit?  And in the midst of all of that, do you need to work on your savings account?

For better financial organization, it’s all a matter of balance — budget planning, expense tracking, debt reduction, and savings tracking.

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Budget planning time

Money in May Recap

The tightrope balancing of a household budget

What a month we’ve had, discussing all of the different parts of financial organization.
Balancing the in-come and the out-go can be a tightrope but with a little planning and organization it can all come together.

Budget Planner Pages
  • In-come versus Out-go: The most basic budgeting rule is to make sure that the out-go does not exceed the in-come.
  • Fixed and Flexible Expenses: Some expenses are non-negotiable such as the mortgage but many are flexible in the sense that they could be managed differently.
  • Spending Tracking: Tracking the incoming and outgoing dollars for two or three months to truly see your money is doing.
  • Debt Reduction: The key to reducing your debt for good is bit by bit. Rarely do we have a huge cash influx in order to make a big dent.
  • Saving Tracking: Having a plan goes a long way to being successful at truly saving money.
  • What are your largest expenses? Take a look at your biggest expenses first before addressing the smaller ones.
  • Where can you save money on outgoing expenses? Sometimes it isn’t about the big savings, it’s about the little ones such as a $5 coffee here or a $10 lunch out there.
  • What do you want to use that savings toward? Keep your goals in mind in order to keep yourself on track!
  • The bottomless well — The list of potential debt can be as long as a CVS receipt. It adds up one charge at a time until you’re underwater completely.
  • More than the minimum — Even if you can only afford an extra $10 per payment, it will add up.
  • Self-fulfilling cycle — The more debt you pay off, the more money you will have to put towards other debt.
  • Where will the savings come from? Even setting aside just $10 per paycheck can add up towards your savings goal.
  • What are your savings goals? Speaking of which, don’t forget to set that goal! It will help keep you on track.
  • What will keep you motivated? There really isn’t an immediate payoff to a savings goal so make sure you figure out what your true motivation is.

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Budget planning time

Money in May Part #4: Savings Tracking

Budget planning time
Savings??? How do I build up savings while I’m still working on everything else??? Let’s talk about some little ways to work on the savings account.

Budget Planner Pages

Where will the savings come from?

After taking a look at your spending tracking and debt reduction plans, where do you intend to find the money to save?  Many experts will tell you to pay yourself first and it truly is an important comment that many people over look.  Savings does not always have to be large amounts like a bonus from work.  Try setting aside even $10 per paycheck into a savings account and then ignoring it.  Some might suggest the envelope method however I prefer not to keep everything in cash (personal preference only).

Some people have taken on a “side hustle” to infuse more cash into their household finances.  This is certainly an interesting approach but can work if you can still balance your home and work lives.

What are your savings goals?

What are you saving towards?  Are you trying to build a nest egg?  Go on vacation?  Fund your kids’ or grandkids’ education?  Planning for your own retirement?  I would recommend building a nest egg first even as you are reducing your debt.  Any available funds could be split between debt payoff and savings.  Having that cushion of savings does go a long way to reducing financial stress in a household.  When the unexpected costs of life rear up, having that savings available makes it quick and easy to address instead of having to add to the credit card balance.

What will keep you motivated?

It can be difficult to stay motivated in regards to savings.  There is rarely an immediate payoff to achieving this financial goal, plus it is lifelong.  There is no “end”.  So how will you stay motivated?  I suggest focusing on what you can accomplish – giving your children a debt-free education, enjoying that family cruise, or being able to live comfortably in retirement.  Those life goals are much more motivating than simply skipping the morning latte.

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Budget planning time

Money in May Part #3: Debt Reduction

Budget Planner Pages

The bottomless well — student loans, credit cards, personal loans

This debt can include student loans, credit cards, personal loans, mortgages, auto loans, and more.  It’s no wonder we feel like we can’t get ahead!  It racks up one at a time, and suddenly you turn around and you’re drowning.  The expenses of living increases faster than the raise at work, and that doesn’t include the unexpected such as a flat tire or a water break in the house.

Making more than the monthly minimum payment

Now, all of that said, there is some personal responsibility to be discussed.  While some debt cannot be avoided, some of it can.  Medical bills can happen unexpectedly (believe me, this isn’t hypothetical) but maybe that new dress or those snow skis can wait.

I recommend making a list of your current debt, including balance, interest rate, and monthly payment.  Once you have the list, decide which to tackle first.  My personal choice is always the one with the lowest balance since I can pay it off fastest and move on to the next one.  You can also choose the one with the highest interest rate since paying that one off will definitely save you money in the long run.  If you only pay the minimum, you will not make progress.  Even if you can only afford to add an extra $10 per payment, it can make a difference.

Self-fulfilling cycle

The debt reduction process is a self-fulfilling cycle.  The more debt you pay off, the more money you have to put towards other debt.  If you pay off a credit card that has a $100 minimum payment a month, that $100 is now available to put towards the next credit card.  This is the main reason I encourage folks to pay off the smallest balances first because you can make real progress and can quickly generate additional cash to put towards something else.

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Budget planning time

Money in May Part #2: Spending Tracking

Budget planning time
The first in this series was about budget planning.
Now let’s talk about tracking our spending habits!

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What are your largest expenses?

Let’s start with the biggest expenses.  Typically that is housing (the rent or the mortgage).  For many households, it can also be debt which might include student loans, car payments, or credit card payments.  Child care and medical care can also take a big chunk out of your paycheck.  Some of these expenses are fixed which means there is no flexibility in the minimum payment.

Where can you save money on outgoing expenses?

While some expenditures are fixed such as the rent, some are more fluid such as groceries or entertainment.  If you wonder why your money runs out long before the month runs out, tracking your spending will help narrow down what is happening with the money.  Oftentimes, it is a $5 coffee here or a $10 movie ticket there but it all adds up.  I am a huge spreadsheet girl and I have created several to track expenses.  At one point, my grocery bill was out of control so I even broke the grocery bill down into its own spreadsheet – hand-entering how much we spent on dog food and coffee creamer and ice cream. Once you have a better handle on the spending, you can start to figure out where you could start saving.  Can you download apps to take advantage of grocery store sales?  Can you start eating leftovers more often?  If you go out to eat, can you reduce your alcohol tab or maybe even split a meal with a friend?

What do you want to use that savings toward?

Now all of this tracking only benefits you if you have a goal in mind.  Once you carve out that extra money, what will you do with it?  Do you want to reduce your debt?  Do you want to take a vacation?  Maybe you just need to build up a nice cushion in your savings account.  If you start to miss that $5 coffee, it will be easier to stay on track if you keep your ultimate goal in mind.  There is no incentive if you don’t know what you are working towards!

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Money in May Part #1: Budget Planning

Budget planning time
So for the month of May, I want to talk with you about your household financial organization: planning a budget, tracking your spending and expenses, reducing your debt, and tracking your savings. There are a lot of moving parts to organizing the financial parts of your life, and I have some tools to make it a little easier.

Budget Planner Pages

In-come versus Out-go

Budgeting all boils down to balancing the “in-come” versus the “out-go”.  And oftentimes, the budgeting downfall is more of the out-go than the in-come.  Tracking both can really help establish the household budget and keep it on track.  In this series for May, we will be talking about tracking our spending, reducing our debt, and improving our savings.  So let’s get started!

Fixed and Flexible Expenses

Some of the expenses are fixed such as rent or a car payment.  However, many of our regular expenses are flexible in the sense that they could be managed differently.  Perhaps keeping the thermostat a degree or two differently could impact the energy bill, or you might be able to reduce your cable bill by changing to a smaller plan.  Being able to improve the flexible expenses will go a long way in helping you achieve that financial organization!

Spending Tracking

Without a good tracking system, it is hard to know where all the money goes.  I suggest tracking every outgoing dollar for two months (three if you have some quarterly payments) to really get a handle on the spending.  There will be some areas that will really surprise you I’m sure!

Debt Reduction

Almost everyone carries some type of debt.  Albeit, a mortgage payment is a different type of debt versus a credit card balance.  But reducing the debt where you can will really help the bottom line of your household budget.

Saving Tracking

In addition to reducing the debt, creating a savings plan is essential for financial organization and peace of mind.  Whether you are saving towards a cushion of cash or a specific vacation or even retirement, keeping track of what you are saving will help keep that goal in mind.  And remember — pay yourself first!

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