New Year Financial Resolutions for 2021. Let’s kick off 2021 with a bang. It’s time to hit the refresh button. 2020 was very challenging. The covid pandemic brought enormous shifts to our daily lives. Social distancing. Working from home. Digital transformation. 5G. Many of these changes will stay with us permanently. It’s time to open a new chapter. Take control of your finances. Become financially independent
Here are your New Year Financial Resolutions for 2021
1. Set your financial goals
Your first New Year Financial Resolutions for 2021 is to set your financial goals. Know where you are going. Build milestones of success. Be in control of your journey. Setting and tracking your financial goals will help you make smart financial decisions in the future. It will help you define what is best for you in the long run.
2. Pay off debt
Americans owe $14.3 trillion in debt. The average household owes $145,000 in total debt, $6,270 in credit cards, and $17,553 in auto loans. These figures are insane. If you are struggling to pay off your debts, 2021 is your year to change your life. Check out my article How to Pay off your debt before retirement. With interest rates are record low today, you can look into consolidating debt or refinancing your mortgage. Take advantage of these low-interest options. Even a small percentage cut of your interest can lead to massive savings and reductions of your monthly debt payments.
3. Automate bill payments
Are you frequently late on your bills? Are you getting hefty late penalty fees? It’s time to switch on automatic bill payments. It will save you time, frustration, and money. You should still review your bills for unexpected extra charges. But no need to worry about making your payments manually. Let technology do the heavy lifting for you.
4. Build an emergency fund
2020 taught us an important lesson. Life can be unpredictable. Economic conditions can change overnight. For that reason, you need to keep money on a rainy day. Your emergency fund should have enough cash to cover 6 to 12 months of essential expenses. Start with setting up a certain percentage of your wage that will automatically go to your savings account. Your rainy-day cash will hold you up if you lose your job or your ability to earn income. By maintaining an emergency fund, you could avoid taking debt and cover temporary gaps in your budget.
5. Monitor your credit score
In today’s world, everything is about data. Your credit score measures your financial health. It tells banks and other financial institutions your creditworthiness and ability to repay your debt. Often. The credit score methodology is not always perfect. That said, every lender and even some employers will check your credit score before extending a new line of credit or a job offer.
Do you find yourself spending more than you earn? Would you like to save more for your financial goals? If you are struggling to meet your milestones, 2021 will give you a chance to reshape your future. Budgeting should be your top New Year Financial Resolutions for 2021. There are many mobile apps and online tools alongside old fashion pen-and -aper to track and monitor your expenses. Effective budgeting will help you understand your spending habits and control impulse purchases.
7. Save more for retirement
One of your most important New Year Financial Resolutions for 2021 should be maximizing your retirement savings. I recommend that you save at least 10% of your earnings every year. If you want to be more aggressive, you can set aside 20% or 25%. A lot depends on your overall income and spending lifestyle.
In 2021, you can contribute up to $19,500 in your 401k. If you are 50 and older, you can set an additional $6,500. Furthermore, you can add another $6,000 to your Roth IRA or Traditional IRA.
8. Plan your taxes
You probably heard the old phrase. It’s not about how much you earn but how much you keep. Taxes are the single highest expense that you pay every year. Whether you are a high-income earner or not, proper tax planning is always necessary to ensure that you keep your taxes in check and take advantage of tax savings opportunities. But remember, tax planning is not a daily race; it’s a multi-year marathon.
9. Review your investments
When was the last time you reviewed your investments? Have you recently checked your 401k plan? You will be shocked to know how many people keep their retirement savings in cash and low-interest earning mutual funds. Sadly, sitting in cash is a losing strategy as inflation reduces your purchasing power. A dollar today is not equal to a dollar 10 years from now. While investing is risky, it will help you grow your wealth and protect you from inflation. Remember that time and time again; long-term investors get rewarded for their patience and persistence.
10. Protect your family finances from unexpected events
2020 taught us a big lesson. Life is unpredictable. Bad things can happen suddenly and unexpectedly. In 2021, take action to protect your family, your wealth, and yourself from abrupt events. Start with your estate plan. Make sure that you write your will and assign your beneficiaries, trustees, and health directives.
Laslly, you need to review your insurance coverage. Ensure that your life, disability, and other insurance will protect your family in times of emergency.
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