More than 92M Americans are likely to make financial New Year’s resolutions for 2022, according to a new WalletHub survey. Despite Covid and the other challenges we’ve faced over the past 12 months, we are still filled with the seasonal spirit that led Benjamin Franklin to advise: “Be always at war with your vices, at peace with your neighbors, and let each New Year find you a better man.”
We all have our fair share of vices and room for improvement, especially when it comes to money. So it’s unsurprising that financially-themed resolutions are among the most popular made each new year. In fact, the top financial resolution for 2022 is to save more, with nearly a third of Americans on board.
But only 42% of resolution-makers expect to keep their vow for a full year, which is not a good sign for hopes of improved money management. Neither is the fact that 7 in 10 people admit to having cheated on a New Year’s resolution in the past.
Don’t be discouraged, though. WalletHub has your back. We put together a list of the top financial New Year’s resolutions to make for 2022, plus a playbook for making them a reality.
10 Financial Resolutions for 2022
- Make a realistic budget & stick to it
- Pay bills right after getting your paycheck
- Add one month’s pay to your emergency fund
- Use different credit cards for everyday purchases & debt
- Repay 20% of your credit card debt
- Get an A in Wallet Literacy
- Sign up for credit monitoring
- Make sure you have enough insurance for a catastrophe
- Focus on physical health, given its strong connection to financial health
- Look for a better job
Below, you can learn more about each of WalletHub’s financial resolutions for 2022, including why they’re good for your wallet and how to accomplish them. You can also get more insights about making and keeping New Year’s resolutions from our Q&A with a panel of experts.
Top Financial Resolutions for 2022 & How to Keep Them
- Make a Realistic Budget & Stick to It: The fact that we’re on pace to end 2021 with over $950 billion in credit card debt is a bit less surprising when you consider that fewer than 5 in 10 adults have a budget, according to the National Foundation for Credit Counseling. Both statistics also signal the need for greater urgency on our part. In short, missed payments and credit score damage are in our future if we don’t cut back, which requires re-thinking how we allocate our money.
The best way to make a budget is to gather your bills from the past few months and make a list of all your recurring expenses. Then rank them in order of importance, with true necessities such as housing, food and healthcare obviously taking the top spots. After that, you can simply cut from the bottom of your list until your take-home exceeds what you plan to spend. Finally, keep track of your monthly spending throughout the year to make sure you’re abiding by your budget.
- Pay Bills Right After Receiving Your Paycheck: Taking care of monthly obligations before letting yourself indulge in any luxury expenses is a helpful budgeting strategy. It gives you a better sense of what you can truly afford and what you can’t. It also helps you avoid ever having a late payment reported to the major credit bureaus, which is one of the easiest ways to damage your credit score. Furthermore, paying your bill early improves your credit utilization, and thus your credit score, by reducing the balance listed on your monthly statement.
We recommend setting up two automatic monthly payments from a deposit account: one for right after payday and another for a couple days before your monthly due date. The second payment will help you avoid interest on any purchases made between your first payment and the end of your billing period. If you don’t know when your billing cycle begins and ends, simply check your monthly statement. You can also request to change it to whatever day of the month is best for you.
To learn more about keeping your payment train on schedule, check out our 8 Tips For Never Missing A Due Date.
- Add One Month’s Pay to Your Emergency Fund: Almost half of Americans do not have a rainy-day fund, according to the Financial Industry Regulatory Authority. Like someone without insurance, people who lack an emergency fund are tempting fate, putting themselves at risk of financial catastrophe in the event of unexpected unemployment or major medical expenses. A lot of people found that out the hard way over the past couple years.
So, building up some reserves should be one of the first orders of business for any financial makeover. We recommend ultimately building a fund with about 12 to 18 months’ take-home income. But it’s important to understand that won’t happen overnight. In other words, you don’t need to put the rest of your financial life on hold until your emergency fund is complete. Rather, chip away at it over time.
- Use Different Credit Cards for Everyday Purchases & Debt: The Island Approach involves using different accounts to serve different financial needs, as if they are a chain of islands. The most basic example is using a rewards credit card for everyday purchases and a 0% APR card for balances that you’ll carry from month to month.
Doing so enables you to get the best possible terms on each card, rather than settling for average terms on a single card. It will also help you reduce the cost of your debt, considering everyday purchases won’t be inflating your average daily balance. And if you ever incur interest on your everyday card, you’ll know you spent too much that month.
- Repay 20% of Your Credit Card Debt: Americans owe way too much credit card debt: roughly $8,000 per household. That debt is extremely expensive, too. Something eventually has to give. And you’d much rather that be your outstanding balance, paid down on your own terms, than your ability to afford monthly minimum payments and, in turn, your credit score. So it’s time to get serious about getting out of credit card debt.
Some of the other steps mentioned here – including budgeting, automation and the Island Approach – will help in terms of reducing your future reliance on debt. But the problem of what to do about existing balances still remains. The answer for people with at least “good” credit is the combination of a 0% balance transfer credit card and a credit card calculator, which has the potential help you save hundreds of dollars while getting out of debt months sooner than you would otherwise.
But it’s probably best to start small. So we recommend making a plan to pay off 20% of what you owe over the course of 2022. That would amount to about $1,600 for the average household, requiring monthly payments of $133 with a card offering 0% on balance transfers for at least 12 months. You can use a credit card payoff calculator to crunch the numbers in your situation, and if you can afford higher payments, by all means make them. The sooner you can reach debt freedom, the better off your wallet will be.
- Get an A in Wallet Literacy: Financial literacy levels in this country are far too low, and they’re headed in the wrong direction. As of 2021, roughly 43% of Americans grade their financial know-how at a “C” or below, according to the National Foundation for Credit Counseling. In 2010, that figure was at 34%.
So start 2022 by taking our WalletLiteracy Quiz and getting a baseline score. Then, throughout the year, study the areas where you struggled and periodically re-test yourself to gauge your progress. Your goal should be to get at least an A- by the time 2023 rolls around.
- Sign Up for Credit Monitoring: Thanks to the increased availability of free credit scores, most people have a good sense of their credit standing these days. Too few of us are familiar with the actual contents of our credit reports, though. That might be because we assume our credit scores tell the full story, but that's just not the case. For starters, as many as one in four people have an error on their report that could affect their credit score, according to research by the Federal Trade Commission. Furthermore, reviewing at least one of your major credit reports on a regular basis will allow you to spot signs of fraud before they get too serious. You can start by checking your free TransUnion credit report on WalletHub.
With that being said, no one can keep tabs on their credit around the clock. And that’s where 24/7 credit monitoring comes in. Signing up for free credit monitoring will enable you to receive an instant notification anytime there is an important change to your credit report. In other words, it reduces lag time when spotting issues and gives you the peace of mind that comes with knowing you won’t miss anything.
- Make Sure You Have Enough Insurance for a Catastrophe: Covid has shown just how fragile and precious life is. And if other people depend on you, the pandemic should illustrate the importance of making sure those people are taken care of, even if you’re not around or able to work. In particular, that means taking steps such as purchasing life insurance and disability insurance, in addition to making sure you have enough health insurance coverage. Hopefully, your family won’t need to file any claims for a very long time, but it’s better to be prepared.
- Focus on Physical Health, Given its Strong Connection to Financial Health: There is a clear connection between physical, emotional and financial health, and it was particularly apparent in 2021. For starters, the average person spends about $5,177 on health care each year. Money and the economy are also our biggest sources of stress, according to the American Psychological Association. And people who get regular exercise tend to have better credit scores.
This underscores the importance of getting your financial house in order as well as exercising regularly and engaging in other healthy practices aimed at reducing health care costs. It won’t be easy, but this is one resolution that will certainly pay dividends in multiple areas of your life. That’s especially true now, as we face unprecedented health and financial challenges as well as increased stress levels due to the COVID-19 pandemic.
“If you begin to make small healthy changes to your diet, increase exercise in small increments, and practice yoga and meditation, you will feel better,” says Deborah Bauer, a distinguished senior instructor of finance at the University of Oregon. “Feeling better will lead to wiser financial decisions that focus on the long term.”
- Look for a Better Job: Sometimes, we get so caught up in spending less and saving more that we forget to address the other side of the equation: how much we earn. But the benefits of finding a higher-paying job could actually end up outweighing everything else put together.
The Covid pandemic also illustrates how impactful finding the right remote job opportunity can be. Not only does working remotely allow you to save on commuting costs and avoid risking your health, but it also gives you more freedom to choose where you want to live. And moving somewhere with a low cost of living would, in turn, stretch your money a lot further.
Ask the Experts: Making & Keeping New Year’s Resolutions
We turned to a panel of experts in the fields of personal finance, business, management and psychology for additional insight into the best New Year’s Resolutions for achieving financial improvement and strategies for sticking to them. You can check out our experts’ bios as well as the questions we asked them and their responses below.
- To what extent do you think the coronavirus pandemic will affect New Year's resolutions this year?
- What are the Do’s and Don'ts of New Year's resolution-making?
- To what extent does a solid support system make it easier to stick to resolutions? Is it a good idea to have a resolution buddy?
- Does rewarding positive behavior make it easier to accomplish a long-term goal? Are certain types of incentives better than others?
- What is the ideal number of resolutions?
- Do you have any tips for people with financial resolutions?