The New Year is a great time to establish your financial goals for 2021. Last year’s Coronavirus pandemic shed light on the importance of financial responsibility and stability for your home and business. Here are a few things to consider as you assess your bottom line and make fresh resolutions this year.
Create a Budget
Whether you keep a spreadsheet or prefer an app, there are plenty of resources available to help track and manage your spending. First, review your monthly income. Then, identify all of your monthly expenses. Identify the bills that have to get paid first, and then bucket out additional spending for the month like gas and groceries, even morning coffee runs and meals out. Your budget can be as specific as you’d like.
What’s important is that you’re aware of where your money is going so that you can be in control of your own spending habits. You’ll also want to compare how much you’re making to how much you’re spending each month and ensure you’re able to include savings in your total budget.
Prioritize Saving
There are several ways to save, as well as many things you’re likely saving for at once. Be it a down-payment on a car or house, a vacation, retirement or emergency savings — the important aspect is that you are saving money separate from the checking account you’re regularly transacting from. When it comes to where and how to save, your options vary from traditional savings accounts to investment portfolios. Be sure to consult with a financial advisor to see what best fits your goals and circumstances.
Keep Cash Accessible
A rule of thumb for emergency savings is to keep approximately three to six months of your expenses in an accessible savings account. Once you’ve worked out a budget and have an understanding of your total monthly expenses, you’ll want to set aside or start to build a savings account specifically for emergency savings. This has proven especially important throughout 2020, as many Americans faced unexpected financial hardship due to the pandemic.
Reduce Debt
Another way to practice financial responsibility in the new year is to reduce or eliminate debt. Start with the smallest credit card or loan balance, and consider which debt has the highest interest rate. Once you’ve paid off one line of debt, apply the funds you were using to pay that debt toward another. Tackling debt in this way keeps you motivated to stay on track toward the goal of being debt free.
Maximize Retirement Plans
Part of saving includes saving for retirement, and you can never start too early. If you have the opportunity to save for your retirement through a 401(k), 403(b) or 457 plan provided by your employer, put aside as much as you can each month. Take full advantage of employer matched contributions, making sure you’re contributing the fully matched amount from each paycheck.
These contributions are typically set-up and automatically taken out of each of your paychecks – pre-tax. In addition to the retirement plan you may have through work you can also consider contributing to a Traditional IRA or Roth IRA. Be sure to consult a financial advisor regarding your particular tax situation.
If we learned anything in 2020, it’s that we must be prepared for curveballs. Let 2021 finally be the year you take control of your finances once and for all.
