5 tips to improve your financial well-being in 2022
One of the most common resolutions in January is to have a better understanding of the finances for the year ahead. Whether it’s your resolution or you’re just looking for some financial advice, we hope you find these strategies for improving your financial well-being useful in 2022.
1. Automate to save time (and headaches)
Automating your finances simplifies financial tasks. Take, for example, recurring contributions to an investment account.
Traditionally, it would be necessary:
- Try to time the market
- Sign into your account
- Deposit money manually
- Make your choice of actions
- To do again next time
With recurring contributions, you set it up once and let your portfolio grow from there. You can also take it a step further and use a custom automation tool like Smart transfers by M1 Finance. This allows you to set up automation rules that let your money flow the way you want it to.
There are many other areas of your financial life that you can use automation for, not just investing.
You can set up savings rules in your bank account that automatically send a percentage to your savings account on payday. You can set up automatic payment on all your monthly bills.
We live in an increasingly automated world, and if you haven’t automated your finances yet, now is a great time to start.
2. Diversify to minimize risk
You’ve heard people say, “Don’t put all your eggs in one basket. Whether they know it or not, they are promoting diversification.
Diversification is one of the cornerstones of financial well-being. This method, used by investors for generations, reduces risk by distributing investments among different categories.
Whether it’s using different types of accounts or investing in a variety of industries, diversification is a critical part of long-term financial health because it reduces risk.
Here’s a real-life example of how diversification protects investors:
If you only invest in two companies and one collapses, you would lose half of your investment.
If you invest in 20 companies and one collapses, you would lose 5% of your investments. Think about what this difference would mean for your wallet.
Keep in mind that diversification can vary from portfolio to portfolio. You can invest in different stocks, you can invest in different sectors, you can explore alternative assets.
3. Learn something new about finances
Whether you’re a market veteran or opening your first bank account, knowing more about finances can help.
Here are some ways for you to continue your financial education:
If you are a reader, choose one of the following 12 smart personal finance books to add to your reading list.
If you’re looking to sit back and have fun while you learn, watch finance movies like The Big Short or Too Big to Fail.
Are you a podcast fanatic? If so, try The Dave Ramsey Show or Women and Money.
Looking for a small newsletter that brings learning to your inbox? Subscribe to some like Morning Brew or Easy Money.
Are you looking for something a little more advanced? Check out the Khan Academy or edX Finance for All.
Regardless of how you learn, the financial knowledge you gain can help you become more confident in your decisions and give you peace of mind.
4. Take advantage of retirement accounts
There’s a reason you hear everyone from financial advisors to parents talking about contributing to a pension plan: these are great savings vehicles!
Let’s look at an example of how IRAs can grow over time with compound interest:
If a 23-year-old college graduate contributes $ 5,500 each year and earns an annual return of 6%, their contribution will increase to $ 1 million by age 65.
Whether you are opening your first IRA or maximizing your contributions, be sure to get the most out of your IRA. In the holiday spirit, this is a great way to give your future self a gift.
5. Planning of regular checks for the accounts
Scheduling a regular financial check for yourself can help avoid mistakes and ensure that everything is in line with your current goals.
Whether it’s a monthly, quarterly, or yearly record, you can use this time to:
- Examine your accounts
- Make sure your budget is accurate and make the necessary changes
- Consolidate investment accounts or bank accounts
- Make sure you’re on track to achieve your goals
You are ready for a financially strong 2022
Now, you are armed with the knowledge and ready to have your best fiscal year in 2022. Remember, just like investing, these habits may not change dramatically overnight. But with discipline and commitment, these strategies can seriously help investors over time.
If you are just starting to invest or looking for more from your brokerage, register for M1. M1 Finance is the Super Finance App that gives you the tools you need to invest, borrow, spend, and build the future you want.
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