15 Best Money Moves To Improve Your Finances in 2022
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It is never too late to start making personal financial plans for your future. The old saying is true after all “A penny saved is a penny earned”. Some people believe that big earnings results in a financially secured future, which is not true. One may earn a lot more than an average person however, they can still end up bankrupt if they do not have to control their expenses.
Improving the financial moves leads to financial independence and makes an individual live life to its fullest without worrying about future financial problems. However, to achieve financial independence the crucial step is to follow strategies to minimize your expenses and amass assets that eventually turn into your financial security for the future.
Finance management may seem an impossible task for some however, with the right strategies it is very much possible. This article will show the 15 best strategies that will help you to improve your finances and will teach you how to do effective financial management for the future.
Table of Contents
15 Best Money Moves to Improve Your Finances
#1. Create a written plan
Individuals looking for making a financial plan for the future need to not only commit to the financial goals mentally but are required to make a properly written plan to make it effective. The financial plan should present the layout of the individual’s earnings, expenses, investments, liabilities, and future saving goals and strategies.
People with short-term plans usually suffer from financial loss in the long run. If you only make a budget of your yearly expenses or you are worried only about how you will survive till the end of this month within your limited salary or how you will pay your credit card debt then you are just going the wrong way. Financial stability comes with long-term planning.
People who want to end up financially independent need to make a written plan at least about 10 years down the road. How much do they earn, what are their expenses, where they can save, and how to increase their income? These are the questions that should be a part of a fruitful financial plan if you want to be financially secured in your future.
#2. Budget for future expenses
Successful finance management is incomplete without budgeting. Anyone who wants to manage their income and expenses need to create a budget. A budget could be easily maintained through various budgeting apps which are available these days or can be managed manually through spreadsheets.
When it comes to effective budgeting, one needs to set a target. Target about how much money they would need to easily spend their life financially independent without their monthly salary. Once a person has a target then it is easier to try to reach this target by cutting down on expenses and investing in wealth accumulating assets.
It should also be kept in mind that this goal needs to be properly researched and calculated including things that might turn up out of nowhere. This goal can be unpredictable as there may be things that might turn up unanticipated such as health issues or accidental crises. Consequently, an emergency fund should be a top priority while creating a budget.
#3. Max out your 401k match
A 401(K) plan is a smart move to improve one’s finances. If an employer is offering this savings plan then one should grab this opportunity immediately. 401(K) plans have tax advantages for the employee. As a result, the employee who signs up for a 401(k) savings plan accepts the condition that each of their paychecks will go to an investment account and not in a personal account.
Furthermore, the employee gets the option to choose from various investment options such as stocks, EFTs, and mutual funds. The tax benefits which an employee receives while contributing to a 401(k) is that their contributions are “pre-tax” which means that the salary comes from the employee’s paycheck before income taxes have been deducted which gives the employee an advantage.
Moreover, another advantage of a 401(K) plan is that the contribution year is tax-free for the employee as well as the withdrawals. Not only are the benefits tax-free savings, but the transactions are also convenient since contributions are automatically subtracted from the salary. In addition, many employers will match part of their employee’s 401(k) contributions, effectively giving them a free boost to their retirement savings.
#4. Rollover your old retirement plan
A 401(K) rollover is a retirement plan which needs to be moved from the old employer-sponsored retirement plan to a new 401(K) account. The rollover is usually needed when an employee changes a job or quits for any reason. In this case, it is important to be mindful of one’s retirement plan so that it is not forgotten by the old employer.
Wen rolling over the old 401(k) plan it is crucial to ask for “direct rollover”. A direct rollover means that the funds from the old retirement plan are transferred directly to the new individual retirement account IRA rather than being transferred to the employee’s personal account. A direct rollover also gets tax benefits and no penalties are charged.
To manage finances effectively, it is important to pay attention to even insignificant amounts of savings. Even if the funds in the old retirement plan are insubstantial or the tax and penalty deducted are nickel-and-dimed, they should not be neglected. When it comes to improving finances, every penny counts.
#5. Open a 529 plan
When it comes to managing finances and budgeting, it cannot be an individual effort but a family endeavor. Each member of the family has to pitch in to achieve the financial goal. Similarly, within a family kids’ college fee is something which is always a concern of the parents from the time their child is born.
One of the best financial aid to save money for the future college expenses for your children is through the popular 529 plans. The 529 are savings accounts that specifically aim for parents or grandparents to save for the college fees of their children. These accounts were introduced more than two decades ago and are essentially federal tax-free to help parents or guardians to support their children’s college costs.
Any US citizen or a legal US resident can open a 529 investment account. The beneficiary could be the children, grandchildren, or the account-holder themselves. There are also many options to use the 529 funds without a penalty if the beneficiary doesn’t go to college. All in all, to start saving for college in the 529 plan ensures that you have covered the college costs which is a major part of financial future goals.
#6. Rebalance your portfolio
In today’s world of recession and constant market fluctuations, it is very difficult to evaluate an investment portfolio of an individual. Consequently, an individual would always have uncertainty regarding their savings. For this reason, an individual needs to rebalance their investment portfolio to manage their finances effectively.
Rebalancing a portfolio means rearranging the values of different underlying assets within an investment portfolio. This rearrangement is only possible by buying and selling the present assets. This would change the balance of value within various assets, alter the risk element within the portfolio, and allow you to make the required changes.
Essentially, rebalancing the portfolio would help you to make a better investment plan regardless of what the market does. This is key in helping individuals to adhere to their risk tolerance levels. However, rebalancing the portfolio correctly would require the help of a financial planner. An expert may be able to provide a more nuanced recommendation based on a person’s risk tolerance and personal goals.
#7. Diversify your investments
It is the universal advice of any certified financial planner and professional fund manager for investors to diversify their investments. By diversification, they mean that do not invest in the same assets within the same company. It is a finance management strategy that incorporates different investments in one portfolio.
There are two main ideas behind the diversification of investments. The first notion is that a range of assets can have strong chances of earning higher returns. As at any given market situation, there will be an asset whose market is going up compared to other assets. The second thought is that diversification helps in covering losses, reduces risks of massive losses, and keeps the assets safe if the market falls.
To establish a diversified portfolio, one needs to look for assets that have low or negative correlations with each other. In that case, if one asset moves down, the other tends to counteract it. In this regard, ETFs and mutual funds are exemplary asset classes to opt for that will diversify any portfolio, but one must be aware of hidden costs and trading commissions.
#8. Harvest your investment losses
Usually, investments also entail tax burdens on capital gains. All sorts of investments other than 401(k) and Retirement plans are subject to a tax deduction on returns. However, if one needs to improve their finances, one way is to reduce tax liabilities as much as possible. One way to do this is to go for Tax-loss harvesting.
Tax harvesting is referred to the selling of assets which are in losses and buying other yet similar assets which have better capital gains. The reason for selling assets is that such investments get tax benefits. As a result, a tax harvesting strategy can help investors minimize any taxes they may owe on capital gains or their regular income.
This process may seem easy, however, it involves many technicalities. One cannot just sell a devalued asset and buy another identical asset easily. The IRS bans investors from deducting a capital loss on the sale of an asset against the capital gain of the same asset; this is called a wash sale.
In this scenario, one strategy is to replace the devalued stock with a mutual fund or ETF that targets the same industry. This will allow one to maintain a common asset allocation in the investment portfolio. Moreover, to use this strategy effectively it is often advised to seek help from a financial planner.
#9. Shop for new insurance
One way of successfully managing your personal finance is to raise the deductibles. This means along with finding ways to get free money one should also look to lowering the expenses. After various taxes, a common liability of every individual is the insurance payments. Whether the insurance is through the employer, or the government, a major chunk of income goes to these payments.
For this reason, it is important to always look for alternative insurance policies which may offer lower rates than the one you are paying to improve your finances. Additionally, there is also an opportunity for an annual open enrollment period where one can change their health insurance policy once a year.
One also needs to keep in mind while looking and shopping for new insurance policies, is to not cancel the previous policies before one finds a better alternative. There are always cheaper auto, health, and home insurance policies available, however, one needs to be mindful of hidden fees.
#10. Open a health savings account
Productive financial plans involve not only short-term budget goals but also includes long-term planning of finances. For effective budgeting one has to have a clear idea of where they would want to spend their hard-earned money and how to save it for a future emergency fund. An important aspect of human life is health and so budgeting for health issues needs to address in any financial planning.
For health-related financial planning, it is recommended to have a health savings account. It is like any savings account but specifically functional for health-related expenses and medical bills. The health savings account has many advantages. One benefit is that one can be financially prepared for any known or unknown health-related expenses.
Moreover, these savings accounts are free from federal income tax and all the savings and capital gains in the account are also tax-free. Additionally, the funds which are not spent would roll over annually so it saved for any future health expenses or an emergency fund. Overall, maintaining a health savings account can improve your finances to a great extent.
#11. Reassess and negotiate monthly bills
Budget management requires cost-cutting or slashing expenses to save more money for future needs. However, this approach does not have the compulsion of cutting back on all expenses rather it essentially means trimming expenses in some areas wherever possible.
One of the saving money moves is to trim the expenses of monthly bills. These bills generally include mobile phone services, internet services, streaming services, etc. The bills of these services could be reassessed by simply going for a cheaper operator or negotiating with the existing company for some discount.
Financial experts recommend assigning a portion of your budget to savings, if possible. This approach of slashing monthly bills can help you to save money consistently every month which could be used to cover an emergency fund.
#12. Be strategic with charitable donations
The standard deduction is a current amount of tax refund that is permitted to be deducted from your taxable income annually. This amount varies according to the tax filing status and is tabulated each year to keep up with the inflation rate. In the years from 2018 to 2025, there was a significant change in the tax law which increased the standard deduction amount two folds and made itemizing tax deductions less preferable for most taxpayers.
However, the advantage of itemized deductions cannot be eliminated. In some cases, itemized deductions prove to be advantageous for some taxpayers to reduce their annual income tax bill more than the standard deductions. Moreover, charitable donations also qualify for itemized deductions within certain limitations.
Both itemized and standard deductions are applicable to improve personal finance. However, to gain maximum benefits out of your tax return, it is important to make an informed decision and strategically conclude about when to itemize deductions and when to go for standard deductions
#13. Invest in yourself
Investing in oneself simply means making yourself more valuable. This can be done either by learning new skills or completing a degree or certified program in any field of interest. Having expertise in any domain is always beneficial, as it not only can help you in your current job but can also provide opportunities for being self-employed.
Making oneself valuable leads to added income. Even if an individual is not looking to switch jobs, added skills and learning are always appreciated and compensated. Moreover, another way of earning more could be by starting a new side business with the help of the newly acquired skill or expertise.
In today’s day and age, earning more requires nothing more than uploading an informative video on YouTube. The options to earn money for a learned person is infinite. All that is required for an individual is to invest in themselves not only to earn more income, but it will unfold tax breaks that are only available to the self-employed.
#14. Update beneficiary information
The entire purpose of improving finances and budgeting is to have a safe and secure future, not for yourself but also for your family. People often remember to buy various insurance policies, invest in retirement plans, and save in savings accounts. However, they forget to update the beneficiary information.
Beneficiary information means the people who would inherit the funds in case of a person’s death. Updating this information is important because one might make their spouse their beneficiary however if one divorces and does not update the beneficiary information then the funds will go to the ex-wife or ex-husband regardless of what the legal will says.
Moreover, in cases of the unnamed beneficiary, the heirs would have to go through a long and tedious legal process to claim their rights. For this reason, it is important to update beneficiary information to make the funds and investments useful for our loved ones.
#15. Conduct an annual review
It is a fact that you can improve your finances successfully only if you are fully aware of your overall financial status. One may imagine that they have up-to-date information regarding their assets however, it is not possible to keep track of every financial information. For this reason, it is essential to thoroughly review every aspect of your finances at least once a year.
The review should include all the savings, assets, credit reports, and liabilities including expenses, and debts. A detailed assessment would help in diversifying the financial portfolio, slashing unnecessary expenses, and saving on extra bills and payments. Additionally, it is also observed that those who examine their credit card debt repayment usually can identify any errors and also detect any theft at an early stage.
Scrutiny of your financial situation will give a complete picture of where you stand in life financially. Whether you have financial freedom and will be financially independent or you are struggling to have some financial stability for your future.
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Conclusion: Best Money Moves to Improve Your Finances
The only thought in people’s minds these days is to have enough money to be able to spend the rest of their life without earning or depending on others. This may seem an impossible task for some however, with the right strategies and tools it is very much possible to improve your finances.
Personal finance strategies can be a productive tool for achieving financial success. The idea of improving finances may seem to be time-consuming and complex, however, with the right strategies it is something that can be achieved by anyone. Nevertheless, along with the strategies it should be kept in mind that finance cannot be improved within a month or a year it takes long-term planning to reach this goal.
Nonetheless, not all financial plans are long-term some are regular tasks and decisions which need to be addressed each day. These small day-to-day financial undertakings may seem unimportant but when it comes to financial success even the smallest things matter. For instance, monthly utility bills, or entertainment expenses all add up to increase costs.
Simple strategies such as creating a written plan, budgeting, reviewing and reassessing monthly bills and beneficiary information, etc. can make a huge difference in achieving your financial goal and managing lifestyle expectations. Moreover, mature ideas such as retirement plans and savings account inevitably lead to financial growth and stability.
Best Money Moves to Improve Your Finances FAQs
What is the best financial move?
Making a monthly budget is the simplest and best move for your financial health. Budgeting is the most productive financial tool because it assists in planning for future expenses, lowers avoidable spending, saves for an emergency fund, and prioritizes where money is spent. However, one should also be mindful that a budget is only productive if it is followed.
There are multiple methods to create a personal budget, but all of them include assumptions for income and expenses. One way to make a budget is by downloading budgeting apps. This is the ideal way to keep track of your money goals and get a credit report. These apps are user-friendly specifically for those who are comfortable with technology and gadgets in their day-to-day chores.
How can I improve my finances fast?
People without even thinking spend their hard-earned money on unnecessary products which deviates them from improving their finances and making long-term financial goals. keep in mind that this goal needs to be properly researched and calculated including things that might turn up out of nowhere.
To save oneself from such tempting spending habits and build good money habits, it is crucial to keep track of one’s finances. Since saving for the financial future or setting long-term goals is a difficult road to walk on, with many chances of straying, it is important to be familiar with different strategies (such as the ones mentioned in this review) to keep track of money goals and not get sidetracked.
What is the 50 30 20 Money rule?
The 50-20-30 budget rule is an effortless and straightforward plan to help people make smart money moves to achieve their financial goals. The rule dictates that one should spend up to 50% of their in-hand income which is left after tax deductions on basic needs. These include survival essentials such as rent or mortgage payments, automobile payments, food, insurance, health care, minimum debt payment, and utilities.
The other half should be divided between 20% on savings and debt repayment and 30% on other wants which are not essential such as entertainment or traveling, etc. This plan is a simple guideline for people who struggle to divide their income in ways to make good money habits. It also assists individuals to manage their money and save for emergency fund and retirement. It is a plain outline for those who cant follow comprehensive plans.
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Author: Wilbert S
Wilbert is an avid researcher and is deeply passionate about finance and health. When he's not working, he writes research and review articles by doing a thorough analysis on the products based on personal experience, user reviews and feedbacks from forums, quora, reddit, trustpilot amongst others.