As we approach the end of the year, consider these actions to help create the foundation for financial success in 2022:
Review spending for the year. Comparing your actual spending with budgeted amounts will help you plan spending for the coming year. For the upcoming year, track spending with an app, spreadsheet file, Google doc, or a written record.
Use flexible spending account funds. Be sure to spend any money in a flexible spending account on qualified medical expenses before the end of the year, or those funds might be lost. However, due to COVID-19, you may be allowed to roll over the full balance into next year. Contact your benefits department to see if you qualify.
Donate to charity. This will not only create a tax saving, but will also help people in your community and around the world.
Create a backup plan. Review the beneficiaries on your financial accounts. You should have a durable power of attorney to handle your financial activities if you are not able to do so. A health-care proxy (power of attorney) is someone to speak on your behalf regarding medical care when you are not able to do so. A will sets how your assets will be distributed after you die.
Consider increased retirement contributions. With increased limits for 2022, plan to increase the amount set aside for long-term financial security while reducing current taxes.
Conduct a life audit. Start with identifying your short-term and long-term goals with sticky notes or index cards. Then, sort your goals by category, such as personal development, work/career, financial, travel, family, community service, and health. Next, organize within a category based on time of accomplishment, which might include: now/soon, always/everyday, later this year, the next year or two, and someday. Take photos of your notes, place them in a visible location, or use an app such as OneNote as a reminder of these targets. Finally, reflect on your goals by determining why you have certain goals and what actions you need to take. Be sure to set deadlines. Also consider how your goals relate to the type of life you desire for yourself. Do your goals reflect your beliefs, values, work situation, and personal relationships?
For additional information on year-end financial planning, click here.
Have students talk to others about recommended financial actions to take before the end of the year.
Have students create an action plan and timeline for a specific goal.
What attitudes, behaviors, and circumstances might restrict a person from taking certain year-end actions?
Describe information sources and personal contacts that might be used to obtain guidance for achieving a specific goal.
35% of credit card holders paid only the minimum on their credit cards?
In September 2019, the FINRA Foundation released data from its latest Financial Capability Study—one of the largest and most comprehensive financial capability studies in the United States. Among the findings, younger Americans, those with lower incomes, African-Americans and those without a college degree face the toughest financial struggles. More than 27,000 respondents participated in the nationwide study. Conducted every three years beginning in 2009, it measures key indicators of financial capability and evaluates how these indicators vary with underlying demographic, behavioral, attitudinal and financial literacy characteristics—both nationwide and state-by-state.
Financial goals are communicated in many formats, and are good to have. However, too often, a goal is lacking the “why.” While various financial planning actions are beneficial, quite often, little thought is given to the motivation behind a certain goal. Without this “why,” minimal internal motivation is likely to be present to see a goal to completion. The “why” of a financial goal will help you persevere when encountering challenges that could derail your achievement of a goal.
Not being able to answer the “why” may indicate that the goal is not worth your efforts. The “why” will also assure that a goal provides a higher level of satisfaction when it is achieved. The process may require a series of “why” questions as you respond to the initial “why.”
Instead of being an afterthought, the “why” of your financial goals should be a driving force in creating and achieving these personal economic objectives. Be able to decide if a goal is a result of advertising, societal influences, or reflective thought about your personal financial situation. This action should result in meaningful goals rather than just efforts to accumulate more money or more stuff.
For additional information on financial goals, click here.
Have students talk to people to create examples of financial goals.
Have students ask a series of “why” questions to help other people to better focus their personal financial goals.
What are common motivations that influence personal financial goals?
How might a person better understand the motivation behind personal financial goals?
“So put aside that beach read for a few minutes and take this quiz to assess your financial SPF factor.”
While most people recognize SPF as standing for sunscreen, SPF–as defined in this article stands for Save, Protect, and Fund. After a brief explanation of each SPF financial term, the article asks 11 questions that someone can use to help gauge their financial knowledge and financial planning skills.
At the end of the quiz, you are also told how your answers stack up and then the article provides suggestions about how to improve not only your score, but also your ability to plan for your financial future and retirement.
You may want to use the information in this blog post and the original article to
Stress the importance of effective financial planning over your lifetime.
Begin a discussion about the benefits of long-term investments.
Review time value of money calculations.
How can financial planning help you obtain your goals and objectives?
Why should you begin investing sooner rather than later?
A common problem for some people is they don’t have the money they need to begin an investment program. Given your current circumstances, what steps can you take to “find” the money to start an investment program?
Each year, America Saves (www.americasaves.org) conducts a survey or its program participants to determine the attitudes and behaviors of savers. The most recent study reports that:
People save mainly for their emergency fund, retirement, or repaying debt.
People in formal savings programs, such as America Saves, report saving larger amounts.
Married respondents saved much more than single respondents.
Females and males have different saving purposes; females favored saving for an emergency fund, males favored retirement saving.
Savers involved in America Saves are saving more, are more confident in their ability to manage their money, and are managing their debt better while feeling more optimistic about their financial situation.
The complete Savers Survey report is available here.
Have students talk to others about their savings habits and goals.
Have students prepare a graph to monitor their savings activities.
What actions can help encourage a person to have more effective savings habits?
Why does being involved in an organized savings program result in more savings and better money management activities?
Many devices are used for effective money management. One is called “the financial flowerpot system,” with each imaginary pot representing an account where you “plant” the funds for achieving a financial goal. When you direct money into this account, it’s like watering and feeding your goal.
To fill up the “financial flowerpots,” start a regular saving and investing plan with the money automatically withdrawn from your paycheck or bank account. This automatic savings plan may be viewed as an automatic watering system for an actual flowerpot.
Three main flowerpots are recommended:
1. The Solutions Flowerpot is the emergency fund. These funds are available to solve problems and have a financial cushion, giving you financial peace of mind.
2. The Retirement Flowerpot is to save for your future financial independence.
3. The College Flowerpot is for those who are saving for their children’s education or for their own advanced studies in the future.
Smaller flowerpots may be used for other financial goals. For each flowerpot, set aside a savings amount each month that will grow to your desired goal in the timeframe you set.
For additional information on financial flowerpots, click here.
Have students obtain information from others about the methods used to achieve financial goals.
Have students propose a method they might use to achieve a financial goal.
1. What are the benefits of thinking of savings goals as financial flowerpots?
2. What are other potential savings goals for various household situations?
Before saying no, consider it is a simple way to accumulate $1,378 over the next year. Before saying yes, realize that while it is easy to save small amounts at the beginning of the year, it becomes increasingly harder to save larger amounts at the end of the year on a weekly basis. Take a look at the table below to see how your money accumulates each week.
You may want to use the information in this blog post and the original article to:
Stress that even small amounts of money over time can increase the amount available for savings or investing.
Discuss how monitoring your spending habits can “find” the money that can be used for savings and investing.
Talk about the need for financial discipline when managing, saving, and investing your money.
In the above table, you begin by depositing $1 the first week, then each week, the amount you save increases. Where can you find the money needed to fund this type of savings program–especially toward the end of the year?
Assuming you achieved the 52-week challenge and you now have $1,378 dollars in the bank. Would you leave it in the bank, pay your bills, or invest the money? Justify your choice.
After completing one 52-week challenge, would you take another money challenge? Why or Why Not?
Whether retirement is coming soon or feels far away, it’s something you need to think about.
This article encourages students to make retirement planning a part of their budget and one of their financial goals. It also points out the benefits of starting early—even if students can contribute only a small amount because of other obligations that include paying off student loans and other debt obligations, paying rent, buying groceries, and establishing an emergency fund.
A very good suggestion included in this article is to start by saving just $25 from each paycheck, and then increase the amount until someone feels they have reached a limit they are comfortable with.
Other suggestions include participating in a 401(k) account at work and using bonuses and salary increases to boost the amount contributed to your retirement account.