3 Ways to Overhaul Your Finances in a COVID-Filled New Year

Modern married multi-ethnic young couple calculating financial bills at home.
Pekic / Getty Images

With rapid inflation, a possible interest rate hike in the cards for 2022, and the omicron variant of COVID-19 spreading rapidly, January 2022 looks to bring about as much fiscal uncertainty as March 2020 did.

But just because the future of work, the economy, or our collective health is riddled with unknown factors doesn’t mean we should abandon any financial planning or goals for 2022. In fact, it’s even more important to maintain control over what we can during uncertain times, experts say. Such controllable factors often include spending and saving habits.

If you’re among the 68% of Americans making financial resolutions for the new year, it’s a good time to consider the following factors and how they might have been — or could be in the future — affected by the pandemic.

Retirement Planning: See What it Would Take to Retire Early

If you’re among the Americans facing burn-out at your job or in your career, or you just realized you don’t want to continue working into your 60s or 70s – or even your 50s – it’s time to re-evaluate your retirement goals.

Consider how much more you’d need to save to have accrued roughly 90% of your current salary by retirement age – whatever you’d like that age to be. That’s how much experts say you’ll realistically need to retire comfortably.

Investing for Everyone

Then, consider your options for achieving that goal. Do you need to sacrifice dinners out to put more money into savings? Can you get a second job or a side gig and put all the money into an IRA? If you’re in your 20s or 30s, perhaps you can afford to invest more aggressively for greater returns.

Weigh Larger Purchases Now Against Saving for the Future

With possible quarantines or another remote work stint looming, you may be considering home renovations, the addition of a swimming pool, or even a move to a home that better suits your needs. Evaluate these short-term goals against your long-term goals such as retirement. A financial advisor can help you make sure you’re not jeopardizing your future for the sake of extra comforts today — and perhaps guide you toward choices that will bring you happiness now as well as in the future.

“You really have to rank what’s most important to you,” Winnie Sun, managing director of Sun Group Wealth Partners, told CNBC. “But also look at the long term, as well as the short term.”

Save for Future Fun

If people end up quarantined or major entertainment attractions end up shutting down again, it could be a good opportunity to ramp up your savings.

The U.S. Bureau of Economic Analysis discovered that the U.S. personal savings rate jumped to 32.2% in April 2020, compared to 12.7% the prior month. Ten percent of those polled from the millennial and GenZ generations said they saved more than $5,000 from the start of 2020 through the summer of 2021, while 61% saved $1,000 or more.

Investing for Everyone

If your savings account is still well-stocked for emergencies, it’s time to start saving for some fun when all this uncertainty finally ends. Consider taking whatever money you’re not spending by cutting back on entertainment and put it into a specific, short-term investment fund or savings account for a fun purchase like a vacation, cruise, or a new car.

Many banks and online financial service companies allow you to create different “buckets” or accounts for spending and saving that make it easy to earmark funds for specific future purchases.

Having a fun goal in mind can help keep your spirits up through the long winter ahead while also helping you stay focused on your financial aspirations through the year.

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