Budgeting for the New Year
“Tomorrow, is the first blank page of a 365-page book. Write a good one.”
– Brad Paisley.
The new year brings about opportunities to start things over, differently, or begin something altogether. As you prepare your household budget for 2022, there are some important considerations to think about. First off, you should consider looking at what you spent in 2021. This should include automobile costs including gasoline, repairs, monthly car payments, insurance; property & liability insurance for your home; medical costs (including healthcare insurance & out of pocket costs such as insurance deductibles); clothing; food & entertainment including vacations; and savings for unexpected costs. Determine whether any of your 2021 costs are “non-recurring” in nature. For example, in 2021 you may have had an extraordinary household cost such as a new roof.
Next, factor in 6% inflation or the price increase in consumer products such as groceries, healthcare, housing, transportation, and personal costs such as clothing. Inflation has recently been running at a rate of 6% which means you should expect prices of consumer goods in 2022 to increase by 6% over what you paid for the same items in 2021. While we don’t know how long this increase will continue, I believe it will be most prudent for families to budget for a 6% inflation rate when considering your projected household budget. On a positive note, Social Security has announced a 5% to 6% Cost of Living increase for 2022.
Finally, a good part of any budget is to set aside money into savings. The Alabama ABLE Savings Plan is a great resource to use for saving for an individual with a disability. There are significant tax benefits with ABLE accounts. You may qualify for a state tax deduction on contributions into the account up to a $10,000.00 maximum per year. Also, the funds held in an ABLE account accumulate tax deferred and if used for qualified disability expenses, the funds are tax free when withdrawn.
I hope this information is helpful to you as you plan for the new year. May this year bring new happiness, new goals, new achievements, and a lot of new inspirations in your life!
Jack Knight
Alabama ABLE Savings Board Member
