Should your household budget change in 2022? Here’s how to know

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Promo: If these signs apply to you, it’s time to update your budget.


Key points

  • A budget is something you shouldn’t just set and forget.
  • If your expenses or income change in 2022, it’s time to update this budget.

The start of a new year is a good time to set financial goals and see what it takes to achieve them. For example, you may want to supplement your emergency fund by accumulating three months of living expenses in your savings account. Or, you might want to finish saving money to buy a house.

To increase your chances of achieving your financial goals, it helps to stick to a budget. And if you already have one in place, you’re on the right track.

But sometimes changes to your budget may be necessary. Here’s how to know if you need to change yours in the coming year.

Have your expenses changed?

Your cost of living may have increased recently. Many people, for example, are spending more money these days on groceries and gas due to inflation. And these are increases that your budget should reflect.

On the other hand, you may have reduced some of your personal living expenses. Maybe you’ve paid off your car, so you no longer have to factor in a $300 monthly car loan payment. Or maybe you’ve decided to downsize your living space, saving $200 a month on your rent. These are all changes that need to be factored into your budget, so if they apply to you, your budget needs a refresh.

Has your income changed?

Many people will receive a raise once 2022 kicks off. And if you’re not getting a raise in your main job, you may be planning to increase your income by taking on a side job.

Either way, this extra income needs to be reflected in your budget so you can make the most of it. If your income increases by $300, you might want to specifically allocate more money in your budget to your savings, IRA, or an existing loan you’re trying to pay off.

Of course, your earnings may also be lower in 2022. If you’re considering switching from full-time to part-time, this is a change you’ll need to consider. Likewise, if you’ve worn yourself out from a full-time job and a side hustle, you may decide to put off your second gig for a while and recharge your batteries. But if this is the case, then you will have to take into account the resulting drop in income.

Give your budget the attention it needs

Spending some time adjusting your new budget for 2022 might make it easier to follow and more useful. Look at your expenses to see which ones are changing and take into account any adjustments to your income, for better or for worse.

In fact, not only might it be appropriate to update your budget in early 2022, but you should plan to revisit it three or four months later to make sure it’s really working for you. It might not be the most exciting way to spend an evening, but it’s a decision that could really benefit you financially.

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