Julian B. Morris
Optimistic About 2022 Finances, Americans Hope to Avoid Their 2021 Money Mistakes
Julian B. Morris
In December 2021, MoneyGeek conducted a national survey to understand Americans’ feelings about their financial situations. Most people surveyed reported having regrets about how they handled their finances in 2021, but many remained optimistic about their finances in 2022.
Key Survey Findings:
- Most (84%) respondents identified specific actions they plan to take to improve their financial situations, and almost half intended to set explicit financial goals or make financial resolutions for 2022.
- The most common new year money goals people are making for 2022 include:
- Paying down debt (37%)
- Using a budget or other tactic to manage spending (28%)
- Reviewing current costs to identify opportunities to reduce expenses or shop around for a better deal on things like subscriptions or insurance (23%)
- More respondents reported that their financial situation had improved (30%) than worsened (23%).
- Gen Z and Millennial respondents were nearly twice as likely to say their financial situation improved than to say it declined in 2021.
- On the other hand, women were 44% more likely than men to indicate that their finances had gotten worse in 2021.
- The Great Resignation improved finances for people who took part.
- Among respondents who reported better finances in 2021, 32% said that finding a new job had contributed.
- Gen Z respondents were even more likely (40%) to credit a new job with improving their finances.
- Men were also 54% more likely than women to say that getting a new job had helped them financially.
- One in five (21%) of people who reported their financial situation had gotten worse said they wished they had changed jobs in 2021.
Americans Are Optimistic About Their Financial Situation in 2022
Nearly half (47%) of Americans report feeling optimistic that their financial situations will improve in 2022. Though 23% of respondents said their financial situation had worsened in 2021, only 10% expected their finances to get worse in 2022.
Optimism and goal-setting appear intertwined. Of the 47% of respondents making financial resolutions, 68% believe their financial situations will improve in 2022. Only 28% of those not considering a resolution believe their financial situation will improve in 2022.
Gen Z and Millennial respondents were more likely than older respondents to report setting financial goals in 2022.
73% of Americans Have a Financial Regret about 2021
A majority of respondents (73%) said they had regrets about their 2021 financial behaviors and decisions.
One in five respondents said they regretted not paying down debt or using a budget to spend less in 2021. Another 19% wished they had used a budget or other tactic to spend less, and 17% regretted not investing wisely.
Men and women were about as likely to have financial regrets about 2021, but they tended to regret different things. Men were 57% more likely than women to regret their investments, or lack thereof, while women were 44% more likely than men to regret not taking on a side hustle to earn additional income.
Top 5 Financial Resolutions for 2022
With the new year underway, Americans are full of good intentions — not just to eat better or exercise more, but to take better care of their financial health as well.
Respondents to MoneyGeek’s survey reported several common financial resolutions for the new year, including paying down debt, using a budget to help manage spending, cutting routine costs, investing smartly and taking on side jobs to increase their income.
How many people keep these financial resolutions is another question.
“It’s amazing how much of our financial decisions are driven by behavioral economics,” said Dr. Tayla Miron-Shatz, a psychologist and behavioral economist who previously taught at the Wharton School of the University of Pennsylvania. “Most of the time, people like to think as little as possible, so they decide based on one or two pieces of information, and if these evoke some emotion, even better.”
Following emotions — particularly when it comes to spending money or making investment decisions — can steer people’s finances in the wrong direction. MoneyGeek consulted experts for their best new year money tips to identify sound strategies for turning resolutions into action.
1. Pay down debt.
According to experts, paying down debt is one of the most powerful ways to improve financial health.
“Think of paying down debt as the same thing as earning interest on your money,” said Zach Reece, a CPA and business owner. “Every time you make a payment larger than your minimum loan payment, you are essentially paying yourself…You’re giving yourself a gift.”
There are various options for managing debt and maximizing the positive impact of paying it down. Many experts recommend the “avalanche method,” which involves paying down your highest-interest debts first since those debts cost more over time. Others acknowledge that the “snowball method,” where you pay off your smallest debts first, offers the psychological benefits of seeing some debts wiped out altogether.
“Not all debts are created equal,” said Jason Dall’Acqua, CFP, president and advisor of Crest Wealth Advisors, LLC. “Paying off high-interest rate consumer debt, such as credit card balances, as quickly as possible could save you a lot of money, whereas paying extra on a low-interest rate mortgage may not be the best use of your money.”
Garit Boothe, personal credit expert and finance blogger at Digital Honey, says paying off credit card debt should be your top priority because 15–20% credit card interest rates can be a significant drain on your cash flow.
“The average cardholder had over $5,000 in credit card debt in 2021. That's a lot,” Boothe said. “Free yourself from this by setting aside a small amount every month to pay off your credit cards. This amount needs to be above your minimum monthly payment. Pick one card to pay off first. Put your extra budgeted money there…Continue this process until all of your credit cards are paid off.”
You may be able to negotiate better interest rates on your debts, especially if your credit rating has improved since you took on the debt.
Matt Schmidt, co-founder of Diabetes Life Solutions, paid off his student debts ahead of schedule. Based on his first-hand experience, he recommends reaching out to credit card companies to negotiate a lower interest rate.
“There’s a good chance you accrued the debt when you were in a lower credit score bracket and have a higher interest rate [than you should],” Schmidt said.
Call your credit card company and ask them to review your current credit profile, he suggests, and you may be able to save money on interest and pay off outstanding balances faster.
2. Use a budget to spend less.
Budgeting may feel like doing homework for your least favorite class in school, but it can be key to improving financial health and building wealth.
“Many of my clients are high earners with great savings. They weren’t always that way,” said Julian B. Morris, CFP®, ChFC®, AAMS®, CRPC®, CFS®, BFA®, principal at Concierge Wealth Management. “Some had to build their wealth by creating a monthly budget and living within their means.”
Those efforts can pay off, Morris says. “By staying within their means, they avoided excess spending, were able to pay down student loans or other debt they accumulated and focus on their futures,” he said.
Though it can seem intimidating, creating a budget doesn’t need to be complicated. Experts say understanding your fixed and variable income and expenses is essential, regardless of how much money you have.
Once you have a handle on the numbers, keep it simple. According to Dall’Acqua, even a high-level budget that doesn’t account for every dollar can have a significant positive impact on your finances.
A common method for allocating spending is the 50/30/20 rule.
“Under this rule, 50% of your income goes toward necessary expenses such as rent, groceries and utilities, 30% goes toward discretionary spending such as entertainment and dining out and 20% goes toward savings and debt repayment,” said Amir Behrozi, founder of My Home Dojo, a home products review website with a focus on family budgeting. “The less you spend, the more you can save and fast track your progress on your financial goals.”
Tomy Boby, founder of Everyday Finance, suggests using separate bank accounts, such as having one where you deposit your paycheck and pay bills and another account you transfer a percentage of your income into for investments.
“This can help you by making sure you're prioritizing more important aspects of your finances, such as paying all your bills and investing for your future,” Boboy said.
Another method that works for some people, according to Behrozi, is an envelope system, in which you use envelopes to allocate specific amounts of cash for each type of expense. You can literally put the right amount of money into each envelope or use digital envelopes through a variety of apps.
Focusing on your goals will also help, according to Valerie L. Moses, MBA, senior relationship manager, community engagement and partnerships at Addition Financial.
“Your budget is your foundation for financial success,” Moses said. “Create financial goals to help redirect your spending. With short-term, mid-term and long-term goals in place, it will be easier to avoid impulse purchases and save for the things you truly want.”
3. Cut costs by reviewing routine expenses.
Even if you feel like you don’t have any extra money in your budget, you may find new opportunities to save by closely reviewing your expenses and getting creative about cutting costs. From small changes like skipping going to the movies for a day at the park to more significant changes like refinancing your mortgage, you may be sitting on savings opportunities.
Dall’Acqua suggests using the budgeting process to review bills and see what recurring expenses you can cut out. Look at subscriptions services, such as cable and internet, as well as home and auto insurance to find potential savings, he says.
Morris says many of his clients have followed this strategy. “If they weren’t using a service, they got rid of it,” he said.
Replacing a gym membership with home workouts or outdoor hikes, preparing food at home rather than eating extravagant restaurant meals and spending time with friends and families rather than doing activities that cost money are just some of the strategies Morris says his clients use to save.
“They commit to building for the future while living in the moment,” Morris said.
Reece has done this himself and encourages others to use budgeting apps specifically designed to find subscriptions you can cancel.
“Heck, I probably subscribe to 15 different things at least,” he said. “If you’re not careful, you’ll find yourself paying for things you’re not even using…The money you scrape away from subscriptions can go directly towards larger loan payments.”
Bundling home and auto insurance or other services with one provider can unlock discounts. You can also negotiate with current service providers for lower rates.
4. Invest smartly.
Investing wisely is an essential strategy to set yourself up for a financially healthy retirement. But investing can be risky, given market fluctuations, and it can be hard to know where to start.
“Don’t make investing more difficult than it needs to be,” Dall’Acqua said. “Pick investments based on your financial goals, time horizon and risk tolerance [and] capacity. Keep the basics in mind, such as investing for the long-term: not trying to time the markets, diversifying — not putting all your money into [one stock] — and reviewing your investments on an annual basis.”
Dall’Acqua cautions against thinking you’ll be able to strike it rich on a single stock.
“Picking the next hot stock is not an easy task, so keep it simple by purchasing mutual funds or ETFs, which invest in hundreds of companies,” he said.
“When it comes to following through on investing, the best results come from consistent investment over a long period of time,” he said. “The best way to do this is leaning on automation to help grow your portfolio. Set up automatic transfers into your trading accounts and also make sure those trading accounts can automatically invest the funds on a regular basis.”
5. Take on side jobs to increase income.
Side hustles have become a way of life in the United States. According to Pew Research Center, 9% of Americans are currently doing gig work on ride-hailing or shopping apps. Nearly one-third (31%) said gig platform work was their main source of income over the past year, and 58% said the extra income was important or essential to meeting their basic needs. Additionally, an estimated 59 million Americans — or 36% of the U.S. workforce — performed some form of freelance work in the past 12 months.
Taking on side jobs can be a great way to supplement income and strengthen your overall financial health. Teaching a fitness class, selling homemade goods, starting a part-time job, picking up freelance work or even doing paid surveys or focus groups can boost your earnings.
Boothe says he used to supplement his income by finding free furniture people were giving away on Craigslist or Facebook, cleaning it up and reselling it for $100 or $200.
“You can apply the same process to smaller items, too,” Booth said. “Find something from a garage sale or outdoor market and then resell it on Amazon or eBay. It can be a lot of fun, and it doesn't take much money or time to get started.”
Dall’Acqua suggests thinking about what you enjoy and how you could turn your passion into a side job.
“Put that extra income to good use by eliminating debt, saving, investing and working toward your financial goals,” he said.
Miron-Shatz cautions people not to simply look at the earning potential.
“Remember to look at your income after tax (use an online calculator if you're not sure),” she said. “Will you have second-job related expenses? Babysitting, gas, eating out? Write those down, too. Make sure what's left is worth your time and effort.”
Being Successful With Financial Resolutions
Having good intentions and knowing what you should do are essential ingredients to boosting your financial health. But psychological factors, such as your attitude and outlook, may be even more influential in determining if you can implement and stick to best financial practices.
Experts suggest identifying your financial goals to improve your chances of keeping your financial resolutions: What do you hope to achieve with your finances? Break down those goals into smaller objectives and create a detailed, tangible action plan to start moving in the right direction.
Once you’ve clarified your goals, you can live with financial intention and imagine yourself meeting your financial goals. Think positively, like an athlete visualizing a win, and you’re more likely to be successful. It helps to take a long-term view because improving your finances takes time and consistency.
Take responsibility for your choices rather than blaming others when things don’t go well. Accountability will give you a sense of power and control to take the necessary steps to improve your financial situation.
Remember, just because you’re in charge of your financial life doesn’t mean you can’t ask for help. A support system can help you hold yourself accountable for reaching your goals.
Finally, don’t underestimate the power of self-care. When you feel well — nourished, rested, healthy and strong — you’ll have a greater sense of purpose and more resilience to stay focused on your long-term goals in the year to come.
MoneyGeek surveyed 1,203 Americans using SurveyMonkey on Thursday, December 16, 2021. The survey was calibrated to be nationally representative by age and income.
About the Author
- Pew Research Center. "The State of Gig Work in 2021." Accessed January 16, 2022.
- Forbes. "U.S. Freelance Workforce Continues To Grow, With No Signs Of Easing: New Report." Accessed January 16, 2022.