By Priya

January 3, 2022

 
 
 
 
 
 
 
 

Show notes

🎙 We’re back from our end of season break and season 2 is going to be better than ever! This week, we’re kicking things off with a checklist of 8 simple things you can do right now to set yourself up for financial success in 2022.  🤔

This episode discusses topics like:

  • How to make sure your emergency fund is ready for the new year and any changes in your life;
  • How to make sure you’re budgeting for the right expenses and filling in any holes in your budget; and
  • How to start budgeting and planning for a life you love on a budget you can afford.

Links from this episode:

  • Ready to finally take control of your money and build the life of your dreams? Join Camp FIRE! Camp FIRE is the premier membership community helping you get your money under control and reach your goals for a happy and fulfilling life. With tons of masterclasses, bonus content, spreadsheets, accountability and fun, get ready to say YES to a life you love. Become a Camper now for just $4.99 a month (or get 2 months of membership for free when you pay yearly).

Credits:

  • Producer: Gonzalo Araya
  • Editor: Gonzalo Araya

Transcript

  • Hello hello, friends! And welcome back to season 2 of Girl on FIRE, the financial independence podcast for independent women. 
  • My name is Priya, I’m a chartered accountant, an analyst and the creator of Paper Money Co. 
  • I’m also a fierce financial feminist and the host of this podcast. I believe that a woman who is in control of her money is in control of her life. 
  • And on this show, we take control of our lives and our money. Little by little, week by week. 
  • On this week’s episode of Girl on FIRE, we’re kicking off season 2 with a nice and simple episode to get back in the swing of things. 
  • We’re going to cover 8 things you can do this week to set yourself up for financial success in 2022. 
  • The past two years have been really challenging and strange for everyone. And it also had quite an impact on our finances. 
  • And now, as we kick off 2022, it’s time to reclaim control over our lives and we do that by getting our finances in top shape. 
  • As always, Girl on FIRE is about learning so grab your favourite notebook or journal and get ready to take some notes, or draw some diagrams, write down your questions for me, you do you. 
  • If you listen to this show while doing other stuff or you can’t find a pen then you can always find the transcript on my website at papermoneyco.com/gof44.
  • For my Campers, you’ll find the deluxe edition of the transcript in the Camp FIRE members area.
  • It’s an interactive document which includes my own notes, steps to help you take action on this episode and a space to journal your notes and thoughts.
  • If you’d like to take a sneak peak at the deluxe edition of the transcript, it’s available for all listeners to download for free for this episode only at papermoneyco.com/transcript.
  • Camp FIRE is the premier membership community helping you take control of your money and take control of your life with a ton of masterclasses, bonus content, spreadsheets, accountability and fun for just $4.99 a month. 
  • And because I love helping you save money, you can also get two full months of Camp FIRE access for free if you pay yearly. Head on over to papermoneyco.com/campfire to join.
  • Okay, let’s dive in!

1. Review emergency fund for updates & inflation

  • The first thing I want you to do is to review your emergency fund for any updates that you may need to make and also for inflation. 
  • We talked about emergency funds way back in episode 6, so if you don’t already have an emergency fund then I highly recommend that you go and check the episode out. 
  • But if you have an emergency fund or you’re already working on building one then it’s important to know that your emergency fund isn’t a once and done kind of thing. 

Changes in expense that need to be covered

  • You need to review it at least once a year to make sure it’s up to date. So, for example, your car is a year older now than it was in January 2021. 
  • And that means that you may need more repairs. Or that repairs are becoming more expensive. 
  • So, you need to make sure that you have enough in your emergency fund to cover those increased costs.
  • And that logic applies to everything in your emergency fund. You might need to increase your fund for home repairs. Or perhaps you need to adjust how much you’re setting aside for emergency medical costs. 
  • Maybe your essential expenses are higher now than they were a year ago. And that means that the income replacement portion of your emergency fund won’t go as far as it used to. 
  • Instead of 6 months of expenses, maybe your money will now only cover 4 months of expenses. 
  • So, you need to be reviewing your emergency fund for these kinds of changes in your expenses.
  • And based on your review, you might need to top up your emergency fund with more savings. That’s okay. That’s totally normal. 
  • What you want is to avoid a situation where you need to rely on your emergency fund which you thought was fully funded. 
  • And then you realise that you don’t have enough money for what you need.

Adjusting for inflation

  • Now, you also need to increase your emergency fund for inflation. Because inflation is a decline in purchasing power over time — $100 in 2022 doesn’t stretch as far as $100 did in 2002.
  • So, if you had $20,000 saved up for emergencies in 2021, that will be worth less than $20,000 in 2022. 
  • Inflation is a vicious and nasty beast. Which means that you need to adjust your emergency fund for inflation every year, at least once a year.
  • And then create a savings goal to top up your emergency fund accordingly. 
  • So, for example, my emergency fund is $40,000. And I know that’s a lot higher than it is for most people.
  • If you want to know why my emergency fund is so large, check out episode 6 where I talked all about emergency funds. 
  • But with a conservative inflation rate of 1.5%, it means that my emergency fund needs to be $40,600. 
  • That’s an extra $600 which I get from taking $40,000 and multiplying it by 1.5%.
  • Now, if I leave my emergency fund as it is, that means I’m falling short by $600 somewhere. There’s an emergency out there for me worth $600 that I’m not covered for. 
  • So, to keep my emergency fund up with inflation, I need to save an extra $600 as soon as possible.

2. Review expenses for averages that need to be budgeted

  • The next thing you need to do to set yourself up for financial success in 2022 is to review your expenses to see what you might need to change in your budget.
  • So, what I want you to do is look over your expenses for the past 12 months and take note of what your spending looked like. 

Trends in your historical spending

  • You’re looking for two main things here. You’re looking to understand how expenses change throughout the year from month to month. 
  • For example, your utilities expense might go up in summer because it’s hot and you’re running the A/C all day. 
  • Identifying and understanding these trends is important because it helps you predict what your expenses will look like for the year ahead.
  • So, if we go back to the example with the utilities increasing in summer — when summer comes around again, you have a strong foundation on which to base your budget on.
  • What you’re looking for here is any predictable patterns in the way you’re spending your money. You’re trying to understand how your spending changes over the year. 
  • A quick look at your annual spending this way could show you that you need to budget for more food over the holidays and more entertainment expenses in the spring. 
  • That’s just an example. For me, I know that my fun spending increases from September to November because I like to splurge for my birthday. 

Average spend in each area

  • The other thing you’re looking for is how much you spend in any particular area, on average. And this is especially the case for variable expenses like food and fun spending.
  • Because those expenses are shaped by your decisions as opposed to being shaped by bills.
  • So, for example, maybe your fuel expenses go down over the holiday season because you’re staying at home and you’re not going anywhere. 
  • But you might also notice that expenses are increasing just because of lifestyle inflation. 
  • You’re just spending more money in some areas, like food or entertainment because you have more money to spend.
  • Or maybe you’ve been successfully and sustainably cutting back and you’re spending less in some areas than you used to.

Anomalies during COVID

  • Now something to keep in mind here is that 2021 and even 2020 are strange years. Your costs are going to look weird because those years were out of the ordinary for all of us. 
  • You were probably spending a lot more on groceries and food delivery than you were on travelling, going to the salon, or going out to eat.
  • You probably spent more on electricity because you were at home and spent less on fuel because you weren’t going anywhere. 
  • So, these anomalies are going to make this task harder than normal. But just keep this in mind when you’re reviewing your expenses.
  • Because if you’re starting to go out to eat more now than you have in the last 2 years, then you need to think about increasing your budget in those areas. 
  • What you’re doing here is looking at the past to inform the current and the future. Your costs won’t all be the same as they were last year and that’s perfectly okay. 
  • The idea is that you’re using last year and the last few months as a basis for what you’re budget will look like in the present. 
  • And the reason we look at the last 12 months instead of just last month is because December and January are different. There’s no Christmas in January. 
  • So, your spending might look different in months where you have special occasions or events.

What data should you use?

  • Now, if you’ve been budgeting for at least 12 months, then you have 12 months of incredibly insightful historical data that you can rely on. 
  • If you’ve only been budgeting for a few months, then just use what you have, and you’ll get the full benefit of this exercise next year. 
  • If starting to budget is one of your resolutions for this year and you’ve never successfully budgeted before, then don’t worry, in Camp FIRE, you’ll learn how to budget effectively.
  • It’s important to just start where you are and in a year from now, you’ll be amazed at how much progress you’ve made and how much data you’ve collected.
  • Depending on how you’ve budgeted in the past, this task might be a little tough because you need to gather a lot of information. 
  • But for my Campers, you get access to my Money Mastery spreadsheet as part of your membership which means that you won’t face the same problem next year or ever again. 
  • All the information you need will be in one spot, automatically populated and ready for you to review and take action. 

3. Check bill tracker for any new bills that need to be added / cancelled

  • Next up is a bit of an easier one — the new year is a perfect time to update your bill tracker. 
  • You’ll need to add any new bills that have come along into your bill tracker, as well as remove any old bills that you’ve cancelled and don’t need to worry about any more.
  • Also, make sure that you update other details for any of your existing bills like the amount of the bill and when it’s due. 
  • This is also a great opportunity to review any subscriptions you have to digital content, streaming services, apps and make sure that you’re happy to keep paying for what you have. 
  • And if not, then go ahead and cancel those services. Don’t wait to cancel them. Don’t write a reminder on your phone or a post it note or anything. 
  • Just do it right then and there on the spot. It takes 2 minutes to go to settings and press cancel. 
  • So, save yourself the heartache of forgetting and getting charged. Just do it now.
  • It’s a small action that will put your mind at ease and take something off your plate in the future. Our to-do lists are long enough.
  • And it really gives you a nice motivational boost because you’re actually taking action and making changes instead of just constantly planning.

4. Organise & file important documents

  • On to item #4 — this is another easy one. Well, it’s easy to do but it’s hard because no one wants to do it and that just leads to a whole lot of procrastination. 
  • But the start of the new year is a great time to organise and file away all your important documents. 
  • Now, I’m not necessarily talking about paper here. I’d actually recommend doing this digitally as much as possible. 
  • But filing away these documents in a neat and organised way will clear up some clutter in your brain and in your home. 
  • And it’ll make it really easy to find things when you need them. So, I’m talking about things like bills if you want to hang on to them — a lot of the times you can log into your account with the supplier and see your billing history. 
  • But also things like loan documents, insurance policies, lease documents, employment contracts, investment notices, tax returns — that type of stuff.

5. Shop around for cheaper bills

  • Moving on to #5, it’s actually one of my favourites. Spend a bit of time shopping around for cheaper bills. 
  • It’s such a great feeling for me to find cheaper ways of paying for what I need. Because cheaper car insurance means more money for planners and travelling and Kate Spade handbags. 
  • And insurance bills are actually a great place to start here. I recommend reviewing your coverage first. Don’t pay for anything you don’t need.
  • So, figure out what you need and then call up your current suppliers and ask them for a better rate. 
  • Whip out that old “I’ve been a loyal customer for 5 years but I’ll jump ship to your competitor for a better rate” routine. 
  • It doesn’t always work but sometimes it does and it’s actually a super rewarding feeling. 
  • But after that, just do some Googling and shop around. I recommend doing this at least once a year. 
  • It’s a good way to save a bit of extra cash without having to make really drastic lifestyle changes. 

6. Set goals for the year ahead

  • Number 6 is another favourite of mine — setting goals. I actually don’t set goals in December or create New Years’ Resolutions for myself in January. 
  • I feel like people attach so much significance to January 1st. Yes, it’s a New Year but it really doesn’t feel like there’s much difference between December 31st and January 1st.
  • It’s a day off work, and that’s amazing but that’s really all it is. There’s nothing magical about it.
  • And I say that because I don’t want you to freak out if you haven’t set any goals — especially financial goals — for 2022 that started on January 1st.
  • I don’t set my goals for January, it’s meaningless to me. I set goals in November. Because I have my birthday in November. 
  • I level up, I get older. I am literally changing in some way. I’m not just marking another free trip around the sun, I’m marking another year of life going by.
  • So, it’s much more magical and important to me. It means something to me. So, I set my goals in November. 
  • You can set your goals whenever it matters most to you. I recommend going with the birthday method. I think it’s really cool. 

A holistic view to goal setting

  • Now, a couple of things to note here. When it comes to goal setting, it’s important to take a holistic view here. Yes, you should have some financial goals. 
  • Maybe you have goals around saving or paying off debt or investing for your retirement. Maybe you want to buy a new house, or buy a new car, or get a higher paying job. 
  • That’s all great. But what about everything else? I’ve said it before but I’ll say it again. Money may not by happiness but it does buy almost everything else. 
  • There’s nothing in this life that comes for free. About 99% of your goals will require some form of financial consideration.
  • Maybe you want to teach your kids how to drive. Well, you might need to save more for car repairs in case they bang it up a little. 
  • Or maybe you have a goal to go on a weekly date night with your spouse. It could be going to a movie or some other activity, or going to dinner or even cooking a meal together at home. 
  • None of those things are free. Maybe you want to read more — books aren’t free. You can go to the library but maybe you like to read in a cafe. Coffee ain’t free. 
  • Do you see what I’m getting at here? We need money for almost everything in life. So, when you set financial goals you also need to be thinking about the bigger picture. 
  • What kind of life do you want? What are your other goals? And how can you use your money to help make it happen. 

Setting goals as a couple

  • The other thing I want you to keep in mind here is that if you’re partnered up, then goal setting includes your own personal goals but also goals that you have together as well. 
  • We’ve talked about this a bit before but being able to communicate about money — or about anything, really — with your partner is super important. 
  • And one of the things you should be talking about is what your shared goals are. 
  • Getting on the same page about these things and coming up with a plan that supports both of you is really crucial.

7. Set up sinking funds for all your goals

  • Next up is #7 — once you’re done with your goal setting, set up some sinking funds. 
  • We talked about sinking funds in detail in episode 40, so go back and listen to that one if you have no idea what I’m talking about. 
  • But start saving towards your goals. The sooner you start, the easier it will be. It doesn’t matter if you can only save $5 at a time. 
  • Doing something is all it takes. Taking small steps forward is 1,000 times better than standing still. 
  • The good news is that if you’ve reviewed your insurance coverage and shopped around for cheaper bills, you might already have found some extra money to save.
  • The same goes for any subscriptions that you were being charged but you weren’t using. 
  • You can reclaim some of that money and put it towards something else that’ll get you closer to living your dream life.

8. Look for better HYSA

  • And that brings me to the last item on the list for today. Once you’ve figured out your goals and your sinking funds, shop around for a better high yield or high interest savings account. 
  • We can all agree that banks kind of suck. They give you peanuts in interest. But it’s also important that your money in the bank is earning something. 
  • And that’s because inflation will slowly eat away at your savings. The best case scenario would be finding a savings account that offers an interest rate which is higher than inflation.
  • But given how unlikely that is, at least find a savings account that doesn’t charge fees and gives you as much interest as possible. 
  • It’s easy money. Your money just has to sit there and do nothing until you need it. So, earning a little bit extra through interest is always a good thing.

Next weeks’ episode

  • And that’s all I have for you Girls on FIRE today! Season 2 is going to be twice as amazing as season 1 and I’m so glad to be back to making podcast episodes.
  • My challenge for you this week is to start working through these steps. You don’t have to do it all in one day or even one month. 
  • But one small step you can take today is to schedule in time for completing these steps. 
  • For my Campers, the deluxe version of the transcript including action items and additional notes is up and waiting for you in the members’ area. 
  • On next weeks’ episode, because I’m feeling travel sick — I’m sure there’s a word for it, I don’t know what it is. But it’s the opposite of homesick. 
  • My feet are itching to be in an airport and boarding a plane. But because of that I’m going to be sharing 4 things I learned about money while living in Europe for 15 months. 
  • It’s going to be a really interesting episode, so you’re definitely not going to want to miss it. 

Rate, review, share and subscribe

  • Don’t forget to rate and review this podcast at papermoneyco.com/podcastreview. It really helps me figure out whether you’re enjoying this content and learning from it. 
  • Your feedback helps me improve my content so that the episodes get better and better. 
  • It’s also the best way you can support this show and it’s totally free. Leaving reviews helps others find us, as well. 
  • As always, if you enjoyed this episode or found it interesting, then spread the love and share it with your friends. 
  • And remember — when you’re in control of your money, you’re in control of your life.
  • Bye for now - I’ll see you next week!

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Disclaimer

The advice shared on Girl on FIRE is general in nature and does not constitute financial advice. The information shared does not consider your individual circumstances. Girl on FIRE exists purely for educational purposes and should not be relied upon to make an investment or financial decision.


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