3 Personal Finance Issues To Look Out For In 2022

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As the new year rolls around, it’s best to plan for your personal finances as a lot has happened since the pandemic started. In this article we will go through three themes that’ll impact your personal finance situation in 2022: the impact of the omicron variant, evolution of the workforce, and mortgage rates.
 

1. Omicron Impact

Just as some people felt like the pandemic was finally coming to an end, the Omicron variant started to rage through again. 

One concern stemming from the Omicron variant is the financial distress for those who may be already in a difficult financial situation. For example, individuals who are already on a  Chapter 13 repayment plan may have difficulty repaying if they lose their job or have a decrease in pay due to being out of work from Omicron. This is more the reason why it is crucial to carefully evaluate your financial situation during this pandemic and prepare an emergency fund if you can.

A potentially more positive factor from the Omicron variant is that many companies that planned for staff to go back to the office have reverted to remote work. Depending on whether remote work could be a permanent option, some people have decided to permanently relocate to areas more suited for their long term goals. This could be somewhere with a lower cost of living, or safer, or generally better suited to raise a family. 

2. Evolution of the Workforce 

While it's a good habit to review and evaluate if your career goals are on track every year, the pandemic has rapidly changed work for many. As mentioned earlier, many employers are transitioning to remote work or hybrid work. This has also offered additional flexibility for employees. The time saved from commuting is an opportunity to invest in yourself or spend time for leisure. What’s just as interesting is that according to the Harvard Business Review, some employees are shortening the work week as opposed to  increasing pay as a way to attract talent. What does this mean for an employee’s finances? If your budget is already in order, and you highly value your personal time, it’s worth considering having more free time rather than higher pay. 

With the Great Resignation, many people are looking at alternative career options. For example, some people are looking into the  freelancing industry because it offers more flexibility than the traditional workforce. If you had the dream of joining the great resignation and are thinking about pulling the trigger, you must plan for it and account for the burn in savings. Additionally, if you may need to set aside a budget for the proper equipment for going out on your own, including purchasing the right laptop. It’s imperative to have enough cushion and emergency funds to last until you can build up your business.  

3. Mortgage Rates

Mortgage rates were very low in 2021. With the Fed signaling rate hikes in 2022, it’s a good time to review your real estate situation. It could be a good time to look at  whether refinancing your mortgage makes sense and take advantage of lower interest rates if you haven’t already.

Buying a home is a trickier situation, with prices so out of reach for the general population. 2021 saw a huge boom in housing prices across the country. Rates are still relatively low so in theory it could make sense to take advantage and take advantage of lower rates. But there can also be an argument made that higher interest rates might drive down home prices since loans become more unaffordable. 

The same goes for investing in a rental property. Rent rates have increased significantly over the past year. It might make sense to take advantage of the interest rates before a potential hike, but you’d have to look at whether the numbers make sense. 

Conclusion

There are definitely many changes in 2022 to look out for. Omicron continues to impact the economy, making those who are already in a tough financial situation prone to further distress. A positive factor is some people are looking to take advantage of the remote work situation to relocate to more affordable places. In addition to remote work, some companies are offering employees less work hours for more free time. And finally, with interest rates forecasted to rise, it’s also prudent to review whether it makes sense to refinance or obtain a mortgage. As always, careful planning will help you tackle the challenges in 2022 face on!