5 Steps to Strengthen Your Finances in 2022

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Written by Erin El Issa
Senior Writer
Profile photo of Paul Soucy
Edited by Paul Soucy
Lead Assigning Editor
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2021 was a year of financial strain for many Americans: Household debt and the overall cost of living increased, while median household income decreased, according to NerdWallet’s annual household debt study. In 2022, setting grand financial goals may not be realistic for every budget, but there are still smart steps you can take to shore up your finances.

1. Examine your spending

Household finances have changed drastically for many Americans over the past two years. Pandemic relief and stimulus programs — as well as the reduction of certain expenses due to pandemic restrictions, like commuting and travel — may have added money to some budgets. On the other hand, according to NerdWallet’s study, the overall cost of living has grown 7% over the past two years while median household income decreased 3% in the same span, putting the squeeze on many Americans.

A new year is an ideal time to examine your budget. Don’t have a budget? Start by pulling your bank and credit card statements for the past three months and adding up your spending in different categories — housing, food, utilities and so on — to see what an average month looks like for you. Knowing how much you’re spending now is key to creating a realistic budget for the future. Without this step, you might assume you should budget, say, $300 a month for groceries, but if you’re currently spending $600 a month at the supermarket, it’s probably not realistic to cut your spending so quickly by so much.

Once you’ve built a budget, compare your expenses to your income to see how much room there is to progress toward financial goals like saving and investing. You can then determine whether you need to increase your income, decrease your expenses, or both. Based on your eligibility, you might also consider seeking out programs to help you make ends meet, like an income-driven repayment plan for your student loans or the Supplemental Nutrition Assistance Program, or SNAP.

2. Add a little more to your consumer debt payments

Revolving household credit card debt — that is, credit card balances carried month to month — fell 14% over the 12 months that ended in September. But according to NerdWallet’s study, some Americans leaned on their credit cards to get through the pandemic. One in 5 Americans (20%) say they increased their overall credit card debt during the pandemic. Almost the same proportion (18%) say they relied on credit cards to pay for necessities during this time, according to the survey conducted for NerdWallet by The Harris Poll.

If you have a credit card balance and you don’t feel like you’re getting anywhere in paying it off, adding just a bit more to the monthly payment, if possible, can make a big difference.

Say you have a credit card balance of $5,000 at 17% interest, and your minimum monthly payment is $75. If you paid only that much each month, it would take more than 17 years to erase the debt, and you’d pay more than $10,400 in interest. But you could save thousands in interest charges and years of payments if you added $25, $50 or $75 to that monthly payment.

Small payment increases have a big impact

Monthly payment

Interest costs

Years to payoff













3. Evaluate your investments

Of Americans who have received pandemic relief since March 2020, 9% used at least some of that money to invest in cryptocurrency, according to the NerdWallet survey. This may be totally in line with your goals and risk tolerance, but take time to review your overall investment holdings. It’s recommended that you diversify your investments to reduce risk and increase your potential for return over the long term.

If you have a workplace retirement plan — like a 401(k) or 403(b) — participating in it can save you money on taxes in the short term and grow your nest egg in the long term. Consider investing your money there first — notably if your employer offers a match on your contributions. Otherwise, you’re passing up a guaranteed return on your investment.

4. Negotiate medical bills

Medical costs have risen by 31% in the past decade, according to the NerdWallet study. This is a staggering increase, especially when paired with a pandemic that resulted in overflowing hospitals. But medical bills are negotiable, and there are options to break up or even reduce your costs.

Many providers offer payment plans on medical bills. While you should inquire about associated fees or interest, this will probably be a cheaper option than using a credit card that charges interest. In addition, low-income patients may have access to hardship plans, which will break up your costs and potentially lower your overall bill. Ask your provider about these options.

You can also try to negotiate your balance down or seek a medical bill advocate to do it for you. Whichever route you choose, avoid ignoring your bills entirely. If your medical provider sells your debt to a collection agency, you have 180 days to deal with this debt before the collection account shows up on your credit reports. At that point, this debt can hurt your credit scores, making other financial moves harder in the future.

5. Save for something

More than 2 in 5 Americans (43%) who have received pandemic relief since March 2020 say they saved at least some of this money — for emergencies, a home or something else — according to the NerdWallet survey. So regardless of how much you can save and what your specific goals are, everyone could benefit from saving something, whether it’s $5 or $500 a month.

Your goal may be an emergency fund to help you stay afloat the next time the unexpected happens or a dream post-pandemic vacation paid in cash. But no matter what your ultimate goal is, regularly putting money aside gives you options, even if you choose to use the cash for something other than its intended purpose in the future.

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