I spoke to financial advisors about how to catch spending mistakes and create a foolproof budget for 2022

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• I’m doing an end-of-year inventory of all my finances, including my spending and budgeting.
• I asked a few financial advisors if they had any tips for creating a foolproof budget plan for 2022.
• They said to analyze to your habits, focus on the long-term, cut revolving charges, and more.
• Vanguard Personal Advisor Services

One of the final things I am doing in 2021 is taking a full inventory of spending. Before I begin, I want to know what mistakes I should keep an eye out for as I do my deep dive and prepare a budget for 2022.

That’s why I asked financial advisors to share top tips on how to catch budget mistakes so they don’t carry over to the new year. 

1. Analyze the areas where you spend the most

One of the very first things I’m going to do is run a full analysis on my spending habits. Financial planner Jay Zigmont highly recommends this.

“Specifically, look at what you spent eating out and shopping online,” says Zigmont. “Each time we spend $20, or even $50 eating out it does not feel like much, but it adds up.”

He said that if you look at what you spend on eating out, and then divide it by how much you are paid per hour, you’ll get a figure for how many hours you work each year just to eat out.

As for online shopping, Zigmont recommends getting a prepaid debit card for that one purpose and refilling it each month.

“When it runs out, it will bounce, and you need to wait until next month,” said Zigmont. “Really quickly you will cut back your spending.”

2. Don’t sacrifice your savings for short-term happiness

For many of us, our relationship with spending and saving can be complicated. That’s why financial advisor Scott Hasting said that it’s important to catch on to your own negative patterns with spending. He thinks this has been especially crucial for the last two years as life has only gotten harder for most people.

“Now, it is true that everyone has a hard time, but it does not warrant the depletion of savings just to achieve temporary happiness,” said Hasting. “Though everybody deserves to buy a thing or two, the moment you use the phrase, ‘I deserve this’ to justify every purchase you make, [you’ve] already [made] a mistake that needs to stay in 2021.”

3. Focus on good financial habits and stick to them

Financial planner Brian Walsh said that taking a close look at the positive financial habits you’ve developed in 2021 can help you make good decisions in the new year too. 

“Building financial habits takes time, so start with commitment and stick to a routine,” said Walsh. “This includes committing to a weekly budget and reviewing it regularly, creating an emergency savings account, and paying bills ahead of time so late fees don’t creep up, erode your savings and mar your credit.” 

4. Create reminders to stay on track

If you’re taking inventory of 2021 and noticing that you stopped making progress on a lot of your financial goals, Walsh recommends using that knowledge to help you plan ways to stay motivated and on track in 2022.

“Simple and meaningful visual reminders can help maintain motivation once the initial excitement of tackling a financial goal wears off,” said Walsh. “You can use a post-it note on the bathroom mirror, a screensaver on your phone, a picture on your dashboard, and countless other ways to remind yourself of what is important.​” 

5. Cut out any revolving costs that you don’t use or forgot to cancel

Walsh also said that it’s important to remember to catch any costs that you meant to cut a few months ago that have been showing up on your credit card statement.

“Check your transactions for streaming services, memberships, and other recurring charges that may be tied to things you no longer use,” said Walsh. “Canceling even a few unused services and selling items you no longer need could help you earn hundreds of dollars that you can put toward goals like saving for a vacation.”

6. Create a proactive savings plan in addition to cutting spending

If increasing your net worth and saving more cash is important to you, financial advisor Erin Ellis recommends eyeballing your saving habits in 2021 and seeing what needs to change for the next year.

“Start the year off right with a savings plan,” said Ellis. “You will be establishing a habit for yourself, so that once you start putting your money aside, you will hopefully be on the right path to greater financial security in 2022.”