What You Need to Do Now to Financially Prepare for 2022
Every decade, it seems like there’s a “fill in the blank” issue that has never happened before and will forever change our lives. I remember the market crash in the late 1980s, the dot-com bust in the 1990s, Y2K in 2000, the September 11, 2001 attack, the housing bust, and the great recession of 2008-2009. In all of these “fill in the blank” issues, people questioned our ability to recover financially as a country and as individuals.
In each case, our country came back stronger than ever. We’ve gotten passed the “once in a 100-year” issues, and we will get passed the economic effects of the COVID-19 pandemic. That’s how our country rolls—we are a strong country made up of strong people. Economically speaking, you can come back stronger, too.
It’s not a question of if the country will recover economically. The question is what will each of us do personally to recover well. The answer is and will always be the same. Building a solid financial foundation will ensure you can handle “life events with price tags” without having to go into debt.
With the cost of everything on the rise, a crucial part of building a solid foundation is developing a “culture of saving,” or what I call. a savings lifestyle. A savings lifestyle is an intentional, consistent commitment to living on less than you make.
Having money saved turns a stressful financial crisis into a minor inconvenience. Even better, you pay for the minor inconvenience with cash instead of debt.
Below are some implications related to the trends economists are forecasting for 2022:
You may need to increase your budget for expenses.
Inflation means goods and services such as groceries, gas, clothing, and dining out will cost more than they did last year. So review your budget, consider how you can increase the amount you plan to spend.
If you received your Advance Tax Credit this year, there’s less of a tax credit to claim in 2022 and possibly a smaller tax refund.
The payments you’ve received every month since July are equivalent to about half of your Child Tax Credit paid in advance. You usually get these credits when you file your tax return. So, this may mean fewer credits next year, and a potentially lower tax refund.
If you plan to buy a home, it may take longer than expected and cost more than expected.
Zillow economists predict the housing market will slow down slightly but remain hot. This means it will still be challenging to buy homes. You may also have to increase the price range for homes you consider.
If you rent, expect a spike in rent when you renew your lease.
According to a CNN article, national rent in September went up 15 percent from last year. The increase in housing means more people struggle to buy a home, remaining renters. This may translate into a rent increase when you renew your lease.
If you want to find a new job, this is the time to start looking.
The U.S. Bureau of Labor Statistics reported that 4 million Americans quit their jobs in 2021. The media calls this the “Great Resignation.” The number of people leaving their jobs has caused a labor shortage in specific industries. Some employers are willing to pay more, offer better benefits to hire people. If you’re thinking of looking for a better job, the odds are in your favor right now.
2022 may be expensive—but planning can make a difference in how it impacts you.
Your best 2022 may be an expensive year. A lower-than-expected tax return coupled with rising costs is a recipe for debt. However, with planning, you can make 2022 your best year.
Some 2022 planning tips:
- You need to prepare for a possibly smaller than average refund AND save more of the refund than anticipated.
- The upcoming tax season may be busier than average with all the tax changes, so tax returns may take longer to process and your refund may take longer to get.
- Look at your current spending to see where you can cut back to handle surprise increases like a higher-than-expected rent increase. Create opportunities for you to save more.
- Adjust your budget for things like groceries and gas to accommodate higher costs and ways to save wherever you can.
- If you’re hoping to buy a home next year, reset your expectations and realize it may take longer than average or plan for a higher expense.
- Recognize you have value and worth, and if your current employer isn’t paying you enough, maybe it’s time to find a new employer who will pay you more.
Ultimately, your best defense against some of the 2022 trends is to create a lifestyle of savings. With the cost of just about everything rising, your savings will be the buffer you need to stay on track in 2022 financially.