5 Money Management Tips to Be Financially Stable in 2022

With careful planning, the right steps, and self-discipline, you can be on a better financial footing in 2022. Here are 5 money management tips to be financially stable in 2022.

1. Set money goals and reminders:

Write down your financial goals. I prefer to use google docs but you can use any method you desire including good old-fashioned pen and paper. It help will act as a reminder of your money goals, and keep you focused to work hard

I recommend reading those goals daily to reaffirm what you are working for. 

It is also important to set a date when you are writing goals, this will give you a fixed deadline. For example, If your goal is to be debt-free by 2022 then check out this essential guide to get out of debt fast.

If your goal is to build an emergency fund then check out this guide from HSBC bank on building an emergency fund. Automating your savings is a great way to build up your fund as you no longer have to think about it. Whether you’re saving €10 or €1000 a month. The best way to save is to set up a standing order to a savings account.

This creates a savings habit and will make you much less likely to reduce or stop monthly contributions. 

2. Buy Dividend Growth Stocks:

Okay, I am a little bit biased here as I prefer to use a dividend growth strategy as outlined in, Is dividend growth investing worth it. However it doesn’t matter what method you use, the main point is to get your money working for you. Hopefully, good money management means that your money will work harder for you.
But the Question Remains…Why Dividend Growth Investing?

Dividend growth investing has historically provided very good returns

Dividends have played a significant role in the returns investors have received during the past 50 years. Going back to 1970, 78% of the total return of the S&P 500 Index can be attributed to reinvested dividends and the power of compounding.

If you analyze the S&P 500 from 1960-2017, the dividends have grown on average 3.01% per year for the index. To put that into context, if you invested €1000 in 1960 you would have an annual dividend payment of €34.10. Without putting another dollar into your investment and assuming that you withdraw your annual dividends, in 2017 you would receive an annual dividend of €855. Furthermore, your initial $1000 investment would be worth €46,000. Does that sound a lot? If not, try the same calculations with an initial 100K investment instead of 1k.  

Dividend growth investing is tangible.

Share prices can and do fluctuate. Just look back to the last financial crash. Dividends come straight from business operations back to the investor. It is the transfer of wealth from the company to its shareholders. This money will actually hit your account, you can see it and spend it as you please. I like to view this as partially realizing my gains.

I can re-invest in the company if I chose but the option is mine. Even when share prices fluctuate there are companies such as the dividend aristocrats who continued to pay and increase the dividend each year. Some have even continued to raise the dividend through multiple recessions.

There is a place for both growth and dividend companies in any portfolio but for me, the psychology of receiving this dividend is far more relaxing than worrying if I have to sell a company at the worst possible time

It makes the investor excited when the market falls.

When you only have paper wealth, your wealth is directly connected to the fluctuations of the market. This can be an emotional rollercoaster where you could see your wealth diminish by nearly 25% in one week like in the “Crash of 2008”. Think about that for a moment. you have €1 million in your account coming up to retirement and in one week it drops by €250,000.

Could you stomach this?

Now before you say it! Dividend Growth Stocks also fluctuate with the market. However, I am not investing in Dividend Growth Stocks purely for a rapid rise in the share price. According to Intelligent Income by simply safe dividends, History has shown us that over the last 11 recessions the average decline in S&P 500 companies was -31.8% while the average decline in S&P dividend companies was -1.9%.

My goal is to invest for income and for my dividend income to exceed my expenses. I don’t care about the daily fluctuations of price. I only care if my companies can continue to support my income. Companies in the dividend Kings and Dividend Aristocrat lists will have survived multiple recessions while continuing to increase yearly. When the market drops it actually presents a chance to get some of these companies at an attractive price while still collecting dividends.

Instead of fearing the market dropping, Dividend growth investors in the accumulation stage actually welcome these market crashes such as the recent drop in March due to COVID-19.

Get a yearly raise of over 10%

With dividend growth investing strategy, you will typically be investing in companies that will continue to increase the dividend each and every year. It is not uncommon to be raised by 10% or more. In fact, Aflac recently announced a 17% raise here! Could you imagine getting a 17% raise from your workplace? Unless you work for yourself, it is unlikely that you will see raises this high too often. The best part of these raises is that you do not have extra responsibilities or have to do any extra work to receive them.

3. Reinvest your investment returns:

I mentioned above that if you invested €1000 in 1960 you would have an annual dividend payment of €34.10. Without putting another dollar into your investment and assuming that you withdraw your annual dividends, in 2017 you would receive an annual dividend of €855.

However, this could be enhanced even further if instead of withdrawing the yearly dividend, it was reinvested into the Dividend company. The original €1000 investment would have bought 17 shares with a $34.10 dividend in 1960. In 2017, the same investment would now have 93 shares with an annual dividend of over $4000 and the investment would be worth over $250k.  

Reinvesting your dividends is the real beauty of a dividend growth strategy. With good money management, I would recommend Reinvesting instead of spending your dividends.

4. Look for ways to increase your income:

Money management gives financial stability and sometimes it seems easier if you have more income. One way to increase your income is to change your job sometimes moving to another company can allow you to move up the ladder and boost your income. Explore websites like Linkedin which is owned by Microsoft is a great place to find jobs in your profile. 

If you have time you could start a side hustle to increase your income. Having multiple streams of income can be a smart choice. Here are some ideas for a part-time weekend job if you need some inspiration.

Set your goal to create multiple streams of income so that you don’t suffer even after losing your job. Here are a few income streams you can explore. 

5. Take care of your taxes:

Taxes are painful and good money management ensures that you pay them on time. However, there are times where you may actually be entitled to a tax refund.

The easiest way to see if you are eligible for a refund is by checking with an accountant or a service like Taxback.com. They operate in around 12 different countries and only take a fee if you are entitled to get a refund.

The Bottom Line

With 2022 well underway it is not too late to get your finances under control with good money management. Make a pledge to be financially stable in 2022 and use as many tips as you can to experience financial bliss in the coming year.

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Recommendations

Simply Investing Report review – For investors who might like to have all the research done for them

Sure Dividend – Ben and his team help individual investors build high-quality dividend growth portfolios for the long run and offer a lot of excellent content for free. I write company review articles on Sure Dividend each Quarter.

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