In this year of uncertainty, almost every household has faced challenges. And for many, those challenges include the financial impact of Covid.
Nonetheless, there’s a silver lining on the horizon. The new year brings a fresh start to leave behind outdated strategies and revise your personal savings. From investment plans to airtight budgets, let’s discuss how to get your finances in check this year.
#1: Set Financial Resolutions
Sure, you could focus on dropping ten pounds or learning a new language. But don’t forget to include financial goals in your 2021 resolutions.
Looking back on this year, evaluate which personal finance areas were hit hardest. By narrowing your focus, you can make reasonable and achievable goals. Some potentially impacted areas of money management:
- Home mortgages
- Childcare expenses
- Medical costs
- Market investments
Prioritize your damage control needs, and you’ll start off on the right financial foot this year.
#2: Create a Fresh Budget
Stress can often lead to wasteful spending. And for many, a stressful pandemic has turned online shopping into a pastime.
To get spending under control, build a budget that caters to your current financial needs. First time setting limits on your purchases? Here are a few key budgeting tips:
- Identify wants vs. needs – That daily sushi takeout might seem like a necessity. But frivolous expenses can mean losing hundreds of dollars each year. Create expense lists for absolute necessities (rent, toiletries, etc.) and for additional purchases (gift shopping, restaurants, etc.). The former should always take priority in a budget.
- Start a spreadsheet – There’s a reason you find Excel on most resumes. A digital spreadsheet can help you visually organize your budget. If you need a kickstart with formatting, try a budget template builder like PearBudget.
- Use technology – With a smartphone, you can track your budget from the inside of your pocket. Research apps that can sync with your bank accounts and set spending limit reminders. No matter your location, these tools can make keeping a budget a breeze.
- Plan for emergencies – No matter your risk level, budgets should always include emergency funds. As a general guideline, factor in about three to six months’ worth of necessary expenses for a rainy day.
#3: Start (or Upgrade) Investments
The time for investing is always now—new year or otherwise.
You could spend hours researching investment accounts on the web. But if you’re an investing amateur (and most of us are), consider consulting with professionals in wealth management. Their unmatched financial knowledge can set you up for long-term goals like:
- Higher education
- Home ownership
- Family wealth
- Business growth
With compound interest, investing accounts can grow money in your sleep. Start investing this year, and your future self won’t regret it.
#4: Make a Debt Plan
If holiday gift shopping got out of hand, don’t panic. The worst thing you can do is run from debt. Instead, create a stable and feasible plan of attack.
Besides budgeting, there are a few techniques to eradicate debt. Although it may be scary, start with your most expensive debts first. This way, you can immediately lower your highest annual percentage rate fee.
Second, try to create a monthly payment plan with your lender—and stick to it. Certain credit card companies and bill collectors will happily negotiate a payment plan that fits your finances.
And remember—avoid debt-prone situations in the future. By tracking your credit spending and score, you can prevent overshooting your limit.
New Finances for the New Year
If your personal finances were hit hard this past year, you’re not alone. The beauty of a new year (and pandemic economic rebound) is the ability for positive change. Next year, bring a fresh start to your finances with these valuable tips.