THE new year is just days away and some are wondering how they should manage their finances in 2022.
A personal finance expert, who goes by the username BreakYourBudget on TikTok, has broken down how you should organize your money in 2022.
Once you get paid, 5% or a little more should go into a retirement account, while the remaining of the funds enter a checking account, the TikToker said in a 39-second video clip.
She then divides the checking account into three different branches of expenses.
This first branch includes essentials, rent, utilities, insurance, and groceries, which in a “perfect world” would consist of 50% of your income, according to the TikToker.
Next, goals will “ideally” take up 30% of your earnings. Goals include savings, paying off debt, and investments.
The last category is lifestyle, which consists of all other extra expenses such as shopping, going out, and other fun.
“If you’re focusing on your goals, this would be 15-20% of your income,” the personal finance expert said.
But most importantly, the TikToker warned in the text at the bottom of the video that this is only a guideline.
You can adjust your allocations based on your current financial situation and your own personal goals.
When it comes to retirement savings, you can store money away using a 401k, which is an employer-sponsored retirement plan.
Another way of saving for retirement is through an individual retirement accounts (IRA).
A big difference between the two is typically a 401k offers an employer match, while an IRA account allows you to choose between more investment options.
The average American thinks they’ll need roughly a $2million savings pot to retire comfortably, according to a study by financial services firm Charles Schwab.
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