Rebuild Your Savings: 3 Steps to Financial Recovery in 2022

Here's how to replenish your savings after a major hit.

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Key points

• Many people lost income during the pandemic due to layoffs, quarantines, and childcare constraints.
• You can boost your savings by cutting an expense from your budget or setting aside money from a raise or side hustle.

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The pandemic took a major financial toll on a lot of people. In early 2020, jobs were shed left and right as businesses grappled with new restrictions. And even once those restrictions were lifted, many workers struggled to return to a job (at least on a full-time basis) because their children were stuck in remote school and they didn't have adequate childcare.

If your savings account took a bit hit during the pandemic, you're no doubt in good company. And it's also not something you should feel terrible about.

Think about it -- the whole purpose of having savings is to get by during an emergency, whether it's an illness, a major home repair, or a pandemic. And the fact that you had savings to fall back on means you may not have racked up costly debt like many other people did over the past two years.

Still, it's natural that you'd want to replenish your savings so you have money on hand for your next emergency. Here's how to do so.

1. Cut one big expense in your budget

If you took thousands of dollars out of your savings to cover your expenses during the pandemic, then you may need to make some pretty big spending changes to refill your account quickly. To that end, think about one big change you can make for six months or a year that will free up serious cash.

Getting a roommate, for example, could turn your $1,200 monthly rent payment into a $600 obligation. That's a good way to free up money for savings. You could also try moving to a less expensive home -- if you can do so inexpensively and you're not locked into a lease.

2. Bank your entire raise if that's possible

You may have gotten a raise at the start of 2022. If it's money you haven't yet earmarked for other expenses, make a point to send all of it into savings. You can actually put that process on autopilot by setting up an automatic transfer from your checking account.

3. Boost your income with a side hustle

Working a second job could be your ticket to replenishing your savings account in short order. Say you're looking to replace a $4,000 withdrawal you took in 2020. If your goal is to do so by the end of 2022, and you start a side hustle in March that pays you $100 a week, that could be doable.

Take a look at your schedule and figure out what sort of role you can commit to. You may decide to take on a freelance job you can do at your own pace, or you may be willing to sign up for shifts at a local business that needs more hands on deck.

It's hard to build back savings when life forces you to raid your cash reserves. But a few savvy moves on your part could make it so you're sitting on a nice, healthy emergency fund by the time 2022 comes to an end.