How to save, invest and earn more for a better year 2022

This story is part The year to comeGameSpot’s look at how the world will continue to evolve from 2022 and beyond.

Trying to forecast the future can be a wild ride, but recent trends in the world of money and financial predictions from experts offer a window into what 2022 might hold. From rising interest rates to inflation pressures to the new IRS rules, here’s a look at what we can expect — and how to get the most out of our money.

1.) In debt? Make reimbursement a priority

If you’re struggling with high-interest debt, the New Year can be a smart time to prioritize reducing those balances, as the threat of rising interest rates looms.

“The US Federal Reserve has lowered interest rates in response to the pandemic to help stimulate the economy, which has made borrowing much cheaper for consumers. But as the economy continues to improve and the inflation we are seeing becomes more of a concern, it is likely that the Fed will raise interest rates making borrowing more expensive…which can affect everything from mortgages to card debt credit,” says Stefanie O’Connell Rodriguez, host of Real Simple’s Money Confidential podcast.

“If you have credit card debt, now might be a good time to prioritize getting that balance down as much as possible so you’re not just paying the minimum and being subject to interest rates. higher interest rates on your remaining balance as rates rise,” she advises. .

To ease the rate burden, you may want to consider transferring card balances to cards offering 0% introductory interest rate but only if you can pay off the balance before the promotional rate expires, which is often between 12 and 18 months.

Finally, the threat of a rate hike could encourage some landlords incentive to refinance. If your current mortgage has a variable interest rate — meaning it might periodically adjust to the market — 2022 may be a good time to consider switching to a fixed-rate mortgage.

2.) Focused on savings? Compare the prices

Over the past few years, we’ve seen the personal savings rate in this country reach record highs – and for good reason. The uncertainties and life changes caused by the pandemic have led those of us who are still lucky enough to still have sources of income to save more. Stimulus checks have also helped in some cases.

Now, if inflation continues to rise as it has for the past few months, we may need our savings to pay for increases in groceries, gas, homes, and cars. Budgeting for the new year to take into account some of these price increases can be essential, as can putting a little extra money in the bank if you haven’t accumulated any savings yet. .

“If you don’t have an emergency fund, aim to save at least three to six months of necessary living expenses in a high-yield savings account,” recommends Cindy Zuniga-Sanchez, founder of Zero-Based Budget. Coaching LLC in New York. “The emergency fund serves as a financial cushion in the event of job loss, a drop in income or other life change.”

Start with as little as possible, but commit to saving regularly. An app like Digit is popular for helping users save small amounts gradually. It uses machine learning to figure out the easiest amount you can save here and there and does the transfers for you. Digit’s website says the average user saves $2,200 per year with their app. Membership is $5 per month after a 30-day free trial.

And it’s a good time to save, theoretically. While rising rates may be bad news for those in debt, it’s generally encouraging for those looking to earn more than the near-zero percent rate or return they’re used to in their bank accounts. And as more digital-only financial institutions with higher savings rates enter the market vying for our deposits, more consumers can be enticed to change bank.

3.) Falling behind on retirement savings? Focus on new contribution limits

If 2022 is the year you want to boost your retirement savings, good news: In November, the IRS announced that savers could set aside an additional $1,000 in their workplace retirement account. This includes 401(k), 403(b), most 457 plans, and Thrift Savings Plans. The new contribution limit – which is tax deductible – will be $20,500.

As a reminder to those who may have taken advantage of the CARES Act and taken a coronavirus-related withdrawal from their pension plan in 2020 without penalty, you can repay the full amount in 2022 and claim a refund on the taxes you paid. . If you haven’t already, keep in mind that this may be the last eligible year to pay off your retirement account to recover any taxes you may have paid.

4.) Considering a new home? Avoid knee-jerk reactions to rising rates

Prospective homeowners concerned about rising interest rates may be inclined to do nothing or accelerate their purchase. But, as always when considering what is likely to be the the biggest financial purchase of your lifeconsider all your expenses – and take a step back.

“Rates will go up,” says Kathy Braddock, general manager of William Raveis NYC. “But most young buyers should know that in the late 1970s and early 1980s rates were close to 20% and people were still buying homes.”

Braddock’s advice to homebuyers is to do the math first to see which move — renting or buying — offers the most financial and lifestyle benefits. If you decide to buy in 2022, it is all the more important to have a solid credit score to bet on the best possible rate. Look for a quality loan and, to help weather market fluctuations, lock in your rate and commit to at least three years to stay in the home before you have to sell, says Braddock. Our CNET Mortgage Calculator can also help you better determine the price of the house you can afford.

If it’s any comfort, the National Realtors Association predicts an increase in housing supply next year based on expectations of new construction and the expiration of the mortgage forbearance program prompting some homeowners to sell. This could help reduce the pace of house price increases over the past year and lessen the sting of rising rates.

5.) Want to make more money? Hire your employer

With 2021 Big resignation leaving some companies looking for new talent, the new year can be a fertile time for you to finally get that promotion or raise. That is, assuming you’ve added value and plan to stick with your business.

Although a higher salary may be a priority, remember that there are other financial benefits your employer may be able to provide. Financial wellness programs that offer credit counseling and help workers budget and save are increasingly becoming a valuable employer benefit that potential workers are looking for. In fact, nearly 70% of workers say it’s their employer’s responsibility to help them become financially healthy and secure, according to a 2021 survey by the Employee Benefit Research Institute.

If you have student loan debt or plan to return to school, remember that a lesser-known provision of the CARES Act temporarily allows employers to provide up to $5,250 in tax-exempt student loan repayment contributions. tax or tuition assistance each year, through the end of 2025.” With four full years remaining, now is a great time for employees to be proactive in asking if their employers are aware of their ability to provide this financial wellness benefit and whether they are willing to do so,” says Patricia Roberts, financial aid expert and author of Route 529.

In summary, 2022 poses unique financial challenges and opportunities due to the likelihood of inflation and rising interest rates. They are worth considering as we aim to manage our money well and achieve our short and long term goals. If you haven’t eliminated high-interest credit card debt yet, start there and then focus on building your emergency fund. Rising mortgage rates may fuel more anxiety in the housing market, but future homeowners should take a long view and consider all their expenses. Finally, if you’re hoping to make more money or get financial help, remember: talking to your employer can be a good place to start.

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