2022 Resolutions

It’s that time of year again! I don’t know about you but I just love a New Year. With a new year comes new found motivation and plans for the future. Now, I know a lot of people don’t make resolutions. I also know that a lot of people make resolutions but don’t stick to them. That was pretty much me in 2021. In fact, I wrote about my dismal failure to meet my 2021 resolutions in my post entitled: 2021 Resolutions – Year In Review – I Failed. It’s been said that “those who forget the past are doomed to repeat it.” Well, I certainly won’t be forgetting 2021 anytime soon. So, with last year behind me, it’s time to look ahead towards 2022. So, without further adieu, let’s take a look at my 2022 resolutions and how I plan to achieve them.

Buckle in. This is going to be a long post.

2022 Resolutions – Mindset

Before I delve into my resolutions, I just want to talk briefly about my mindset. I feel as if I am totally committed to making sound financial decisions in 2022. It’s hard to explain and I know it’s also easy to say at the beginning of the year. I also know that life is what happens when you make plans.

I know I am not perfect, and I know it won’t be easy, but I fully expect that if I follow through my with goals, it will be worth it! So wish me luck. But enough stalling. Let’s dive in.

1. Get Out Of Credit Card Debt

Unfortunately, I start the year with credit card debt. Based on what my current debt is, and the final $1000 that I intend to put on my card, the total amount of debt that I have starting 2022 is $6300. OUCH!!!

I barely had any credit card debt in 2021. In fact, I would religiously use my credit card and then pay off the balance every month. But the latter half of 2021 got very expensive, especially having bought a beach condo. Of course, I can’t blame everything on the condo. I also bought expensive Christmas gifts, including spending about $600 on an Oculus 2 virtual headset with associated accessories. And don’t get me started on eating out! Let’s just say my bartenders love me for the tips that I leave them. But, it all stops now.

$6300 is no small amount of money. I’ve already taken steps to cut back. Here are some of the steps I’ve taken.

A. Cash Only Budget

One of the first things I decided to do was switch to a cash only budget. You heard that right. I am now using the envelope system.

I live on $20 a day. I still don’t have a written detailed budget in the traditional sense, although I do track my expenses on a spreadsheet. But, I follow the method of buying whatever I want so long as all the fundamentals are taken care of. Ramit Sethi calls this conscious spending.

So, in looking at my spreadsheet, I’ve determined that I want to live off of $20 per day. I can buy whatever I want, in terms of food, but I can’t go over that.

The $20 is only with respect to food. I still use my card for gas, clothing etc. My food budget and eating out was out of control in 2021 and I’ve so far I’ve made significant progress in that regard. Of course, we are still only in the first month of the year, but I fully intend on continuing this trend, at least until I am out of credit card debt.

B. Take My Credit Card Out Of My Wallet

This is related to being on a cash only budget, but I’ve decided to take my credit card out of my wallet. Granted, I don’t intend on cutting it up or putting it in the freezer. But, it’s too easy to spend money when it’s on a credit card. Psychologically and behaviorally, it’s much harder to spend cash. I know that if I only have $20, I have to watch what I spend.

I didn’t mention this earlier, but I also decided to leave an extra $20 as emergency cash in my wallet in case I need it. I also have my debit card in case I need to pay something with a card. But, by and large, I’ve stuck with this plan and it works. It’s amazing but I am able to buy lunch and dinner with my $20. If only I started this back in 2021!

2. Establish A One-Month Emergency Fund For Each Property

Believe it or not, but I don’t have an emergency fund! Before, I was using my credit card as my emergency fund. Bad idea. This is a good reminder that I am not a financial planner or adviser and you shouldn’t blindly follow the content in this blog. Rather, I recommend you seek out a qualified professional for advise if needed. Generally, they recommend having 3-6 months of an emergency fund.

Although I don’t follow the 3-6 months model (I eventually might), I do think that it’s important for me not to rely solely on the credit cards as an emergency fund.

So, in a giant step towards making sound financial decisions, I’ve decided to establish a one-month emergency fund for each of my 3 properties. That way, if my tenants don’t pay, I know that my mortgage will be paid for that month. To me, tenants not paying qualifies as an emergency. Call it a vacancy fund if you want.

Although I will aim to get out of my credit card debt as soon as possible, I might prioritize this goal first over all the others. Once I’ve established a one-month emergency fund, I will really focus on paying off the credit card debt. Then I will try to eventually get 2-3 months worth of mortgage payments saved for each property I own.

3. Establish A Maintenance Fund For Each Property

This 2022 resolution might occur later in the year, but I plan on having a maintenance fund for each property. Right now, I just pool all my funds together and pay expenses as needed. But it’s good to have a dedicated savings plan for maintenance so that when they do arise, I have an account ready to draw money from.

I really should have done this from the beginning, but it’s better late than never. Because of the many competing interests I have, I don’t expect I’ll be able to focus on this until a little bit later in 2022. However, I might start this practice, even if it’s just $10 per property to get in the habit of saving just for maintenance. Then, I can increase it as need be.

With all these 2022 resolutions, I plan on updating on my progress periodically throughout the year.

4. Resume Paying Off First Rental Property

A lot of my financial goals were put on pause because I bought a beach condo. One of those goals including paying off my first rental property. Before I bought the condo, I was paying off that first rental property fast. Had I not paused my extra payments, I would have paid it off in about 15 years, which is the time I plan to retire. So, in 2022, I plan to resume paying extra on my rental property.

Now, I know it’s been debated whether you should pay off your mortgage early or invest. This is even more so with respect to a rental property where the tenants are the ones paying off the mortgage. Honestly, I’ve gone back and forth numerous times with this decision. But, rightly or wrongly, I’ve decided to pay this off early. I do think I can walk and chew gum at the same time, so even though I will be paying extra towards my mortgage, I also plan on continuing to invest.

At the time of this writing, I only have 3 rental properties. I do plan on getting more. Eventually, I will focus on the snowball method to paying down my rental properties. But, for now, I hope to have at least one property paid off in 15 years when I retire.

5. Max Out Roth 401K and Roth IRA

I was very hesitant to list this as part of my 2022 resolutions. That’s because, to me, this is almost a given. I maxed out both of these retirement accounts in 2021, and I don’t anticipate doing anything less in 2022. My payments to my retirement accounts are automatic and a stable portion of my retirement planning.

Regardless of my investment goals, maxing out my retirement accounts will never change. However, last year, I did something I once thought I would never do. That is, I cashed out one of my old retirement accounts to buy a condo. I also had to borrow money from my Roth 401K (which I am still paying back today). In fact, during that time, I also flirted with the idea of cashing out my Roth IRA to buy another property. So, as the saying goes, never say never. But, right now, even though real estate is an important part of my overall portfolio, I don’t plan on cashing out any of these retirement accounts to buy real estate.

Speaking of which, I am on a 5-year plan (probably about 3 years left) to pay back the money I borrowed from my Roth 401k. So, in about 3 years, I’m going to get a nice pay increase!!!

6. Increase Contributions To Dividend Portfolio To $1000

I plan on increasing the contributions to dividend portfolio to at least $1000 per month. I was, and to some extent, still am debating whether I want my Driving for Dividends Project to count towards the $1000 per month minimum threshold. Because I have a lot going on, I’ve decided that initially, the Driving for Dividends project WILL count towards me contributing a minimum of $1000 per month to my dividend portfolio.

However, as soon as I get rid of my credit card debt, then the Driving for Dividends project WILL NOT count towards the $1000 minimum contribution. This helps me to really focus on getting out of credit card debt, but also not completely neglect my dividend portfolio.

As you can see, I have a lot of plans for 2022. I am fully committed to achieving ALL of my 2022 resolutions. But, I have to also be realistic in that I have a limited amount of resources.

7. Start Saving In Sinking Funds

It’s funny, but I always seem to overspend at Christmas. That’s because I don’t budget for it. Also, Christmas occurs at the same time every year, but it always seem to sneak up on me. And it’s not just Christmas. So, to help save for these goals, I’ve decided to give sinking funds another try.

In order to save in sinking funds, I’ve decided to utilize the Qapital app. Check out my post entitled Passive Savings for more information. I’m grandfathered in, and so it doesn’t cost me anything to use the sinking funds.

Here are the few funds that I plan on saving for.

A. Starbucks Fund

Last year, I would go to Starbucks on almost a daily basis. I would get the same thing: a Grande No Whip Cafe Vanilla Frappuccino. Sounds fancy huh? Well, that fancy drink costs me $5.45 every time I get it. It’s also even more expensive if I’m in a touristy area like the beach. Of course, because I am only limiting myself to $20 per day, I have to cut out this expense from my budget. So, it’s going to be the rare occasion that I go to Starbucks.

But, just for fun, I decided to start a Starbucks Savings Fund where I save $6 everyday!!! We’ll see how long that lasts. I think if I am able to maintain this savings goal, I will probably invest the amount at the end of the year.

B. Christmas Fund

As indicated, Christmas occurs at the same time every year. I don’t buy a lot of people gifts, but the few people that I choose to buy for, their gifts tend to be expensive. Damn those nieces of mine. So, I’ve decided to establish a $1000 Christmas Fund. That’s probably overkill, but that’s not the point. The point is that I want to give saving in sinking funds another try and if I can save a small portion throughout the year then I won’t have to feel guilty about doing a spending splurge at Christmas.

More importantly, I won’t have to use my credit card! So, that’s a win win in my book.

C. Cruise Fund

I want to take a cruise to the Bahamas. Of Course, COVID-19 is still here and cruises are generally not advisable to take at the moment. However, just in case I can take a cruise (or an expensive trip to Europe), I want to establish a fund where I have money to spend.

Although I use my credit card a lot, I have never used any of my credit card points. I have a Chase credit card and at the time of this writing, I have 264,000 points. I think that’s’ enough to send me on a trip somewhere. But, even if the cost of the plane tickets or the cruise is covered by the credit card points, I want to have spending money where I don’t rely on my credit cards. So, establishing a cruise fund is ideal.

Conclusion

Wow, that was a lot. I have lots of plans for the New Year and I am very excited to achieve all of my 2022 resolutions. It won’t be easy, but it will definitely be worth it.

I didn’t put everything on the list that I am working on. For example, I am doing a dry month in January where I don’t drink alcohol. Additionally, part of the reason why I bought the Oculus 2 was to give me something to do at home so I don’t go to the bars and clubs and spend money. I just focused on the financial goals above.

Rather than waiting until year’s end to report on my progress, I plan on doing so on a more frequent basis: perhaps once a quarter. This helps me to stay accountable, and helps motivate me especially when the New Year motivation wears off. Wish me luck and stay tuned for my progress.

What about you? Do you have any 2022 resolutions? What did you think of this post? Let me know your thoughts by commenting below.