Meeting Financial Challenges in 2022

Buying gifts, cars, appliances, toys – and just about anything – hasn’t been easy this holiday season. As you’ve probably discovered, the supply chain – the mechanism that delivers goods from one country to another – is severely strained because of a shortage of workers, shipping backlogs, COVID-19, inflation, and more. 

All of this creates strong headwinds for those trying to effectively manage their financial needs.

Unfortunately, it’s impossible for one family to “fix” all these issues. The key is to take individual steps that ensure success in your personal financial world. As we look toward 2022, here are some ideas and strategies for handling some of the financial challenges on the horizon.

Family Budget

A family-financial strategy starts with a budget. It doesn’t have to be complicated. A simple spreadsheet – or even a piece of paper and a pencil – that lists all of your monthly income and expenses will do the trick. 

You’ll want to include utilities, mortgage, rent, food, entertainment, amounts for savings and anything else that is a recurring cost. On the other side, include all sources of income: salaries, Social Security, pension, investments.

Then total each side. The goal is to have more income – spend less than you make – than expenses. But if you discover that your costs are exceeding your income, you have two choices: spend less or make more.

Your list of expenses is a convenient place to think about ways you can trim costs. Do you need three streaming services? Can you eat fewer restaurant meals? Can you buy fewer clothes? If your expenses-income list isn’t too out of whack, you should be able to bring your budget in line pretty quickly – or celebrate a job well done. 

Inflation

One definite issue in 2022 will be the continuing story of inflation. There are just too many factors moving in the wrong direction for inflation to stop.

Various organizations are arguing about the actual percentages, but it looks like inflation is going to end 2021 between 4 percent and 5 percent higher. And as we move into 2022, labor shortages will still be an issue, which will increase wages in many industries. To pay those wages, companies are raising prices. 

One industry that is having significant problems is automakers. Many are predicting the computer-chip shortage will probably last into 2023. Prices for used cars in 2021 rose by almost 40 percent, according to Consumer Reports, and new cars are up 19 percent, according to USA Today. In 2022 it will probably be more of the same.

While you can’t avoid inflation on every product that you need, you may consider postponing some significant purchases until supply-chain problems are more manageable. 

Social Security

One clear piece of evidence that inflation has been increasing is that Social Security recipients will receive an increase of 5.9 percent in January 2022. This is the highest yearly increase since 1983, when the benefit was raised by 7.4 percent.

While this sounds like great news, many seniors face inflation well above 5.9 percent. One important area – health care – saw increases of 7 percent in 2021 and there are projections of 6.5 percent for 2022. Unfortunately, this comes on top of average yearly increases of 7 percent or higher from 2016 to 2020, according to Benefits Pro. 

Looking Forward

As you and your family celebrate this holiday season, consider establishing a realistic budget. It’s one of the most powerful tools that you have to understand your current financial situation and to provide solid guidance to the financial hurdles that will pop up in 2022-23.

 

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