Financial Recovery for Millennials: Strategies for 2022 After 2021 Setbacks

Here's how to recover from what may have been a truly miserable year.

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Key points

• A new study reveals that many millennials took a financial hit this year.
• With an improving economy and robust labor market, you have a key opportunity to better your situation in 2022.

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After a brutal 2020, many people have spent 2021 in recovery mode. Thankfully, a lot of people saw their financial picture improve in the course of the current year.

But not everyone had that happen. In a new Allianz Life study, 25% of millennials say their financial situation got worse in 2021 compared to 2020. If that's been your experience, here are some key steps to take in the new year.

1. Build an emergency fund

Having cash reserves could prevent you from sinking into debt the next time unplanned expenses arise. And, it could give you the peace of mind you need to move forward from 2021.

As a general rule, it's a good idea to sock away enough money in your savings account to cover three to six months of essential living expenses. You may not be able to build a complete emergency fund overnight, but if you work toward one this year, you may find that your outlook improves tremendously.

2. Make a debt payoff plan

Your financial picture may have changed for the worst in 2021 due to debt. If that's the case, coming up with a payoff plan could put you on a better path and save you money on interest.

If you have a number of credit card balances hanging over your head, consolidating them via a balance transfer could be a smart bet. That way, you might substantially lower the interest rate on your debt, making it easier to pay off. Some balance transfer cards even come with 0% introductory interest rates. You can also consolidate your debt and make it more affordable via a personal loan.

3. Look for a better job

Last year, jobs were incredibly hard to come by. This year, the labor market is loaded with opportunities. In fact, many companies are desperate to hire, and they're offering higher wages and other incentives in an effort to attract workers. A new job could be your ticket to a higher paycheck, better benefits, and other perks that help your finances improve.

4. Boost your income with a second job

Whether you had to deplete your savings in 2021, take a pay cut, or rack up debt, boosting your income could be your ticket to a new and improved financial picture. A great way to secure an income boost is to take on a side hustle.

You have numerous options in this regard, so think about some of the things you enjoy doing. It may be possible to turn one of your hobbies into a side hustle, like writing, baking, or designing jewelry. Or, you could sign up for weekend shifts at a local retailer, pick up data entry work you do from home, or shuttle passengers around town in your vehicle when you have the time.

If your finances took a hit in 2021, you're clearly not alone. But that doesn't mean you have to resign yourself to a similar fate in 2022. Instead, use these tips to help your circumstances slowly but surely improve in the new year.