Don't Wait Until Next Year Plan Your 2022 Budget

Being inflation-ready means categorizing your expenses - here's how.

Covid vaccine rates are climbing, and our behaviors are once again changing. So should your spending. The smart thing to do now is to analyze your budget for 2022.

Those of you with budgets are used to making minor modifications on a regular basis to track your changing needs and financial goals. But there are some additional elements to consider for the upcoming year:

Inflation is on a steep rise, and that's not an overstatement—you might need to bump up your budget for expenses like groceries.

On the other hand, because of inflation and labor market issues, you're more likely to get, or already have received, a larger-than-average raise—a fantastic reason to boost your retirement contributions. (The 401(k) maximum will rise to $20,500 in 2022.)

Payments on US federal student loan debt will resume in February 2022 - don't forget.

Make a budget and stick to it.

Budgeting is all about matching your spending to your principles. It's simpler to see whether you're doing your utmost to make your money work for you if you track where it goes...or not. And when a life event necessitates adjustments in your financial behavior, you're in an advantageous position to make fast changes.

To make things easier for you, categorize all of your expenditures as either nonnegotiable or negotiable. Nonnegotiables are money that you can't do without for one of these reasons:

It's necessary for survival (e.g rent, groceries)

It’s necessary for your financial health (e.g retirement, savings, investments)

It’s necessary for your physical and mental health (e.g gym memberships, therapy)

It’s a debt you’ve committed to pay (e.g student loans)

Expenses that are not negotiable include...other things, which you can cut if you absolutely had to. Dinners out and decoratrive candles? Those are your non-negotiable expenses.

Keep in mind that this is a loose paradigm; what's negotiable for one person may necessary be for the next. Maybe your daily artisanal smoothie is nonnegotiable to you—and that's your call. The objective is to have a ready-made list that you can trim when things are tough and grow when they're easier. If you're interested, there are several free budget templates available on the internet.


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