2022. New year. New you. New look at banking? It would be a smart move.
Now is a great time to take a fresh look at your banking habits and see what you can do to help reach your financial goals. Here are five facts to know about banking in 2022 and actions you can take to boost your finances in the new year.
1. Your emergency fund is still a top priority
With the COVID-19 pandemic, you might have read more in the last two years about the importance of saving money for emergencies than ever before.
It’s still important for 2022.
You want to have enough savings to help cover unexpected financial setbacks — ideally enough to cover at least three months’ worth of expenses — stashed in an easy-to-access savings account, says Caroline Wetzel, a vice president at Procyon Partners, a wealth advisory firm in Shelton, Connecticut.
An ample savings balance can be helpful for more than just financial emergencies. “The pandemic has many people reframing and reshaping their expectations in life,” leading some to quit their jobs to pursue more fulfilling roles, Wetzel says. “If you are thinking about becoming part of ‘The Great Resignation,’ you may need to boost your emergency savings even more, along the lines of six months’ of cash instead of three,” to cover any drops in income, she says.
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Take action: Set up an automated savings transfer from checking to savings to build your bank balance. Make sure that your money is working hard for you, earning as much interest as possible. You’ll often find the best savings rates with high-interest online savings accounts.
If your emergency savings account is fully funded with enough cash to cover three to six months’ worth of expenses, consider putting any extra money into investments that have the growth potential to outpace inflation.
2. Adjusting your budget can help ease the burden of inflation
Inflation edged up in the latter part of 2021, so you will want to pay attention to it in 2022. You may not be able to control inflation, but adjusting your budget can help ease the burden of higher prices and help you avoid savings shortfalls.
Take action: “This is a good time to take stock of where you spent money over the last year,” Wetzel says. (Online bank and credit card statements are a good place to look.) Review your expenses and prioritize must-haves, which could include groceries, housing costs and building up your emergency fund. Then, determine …….