After a year like 2020, I think we all can use a fresh take on things. Think small but strategic changes. If we do this every year all those small things will add up to big results.
The beginning of the year is a great time to focus on what’s going on with your money. Let’s end the coming year in a better place than we started it.
Here are 8 achievable financial resolutions to set, along with some tips on how to keep them.
1. Update your beneficiaries and create/review your Will
Make sure your beneficiaries on your retirement and bank accounts, insurance policy and other financial accounts are up to date. This is critical to ensure your assets will go to the person you want them to.
If you have children it’s also important to have a properly executed Will. Lay out who you want to be guardians of your children if you and your spouse should die as well as how your estate should be distributed. It’s important to understand that beneficiaries trump your Will, so make sure these are not in conflict.
2. Refinance your mortgage and/or student loans
2020 has been painful in many ways. But it has also provided a good stock market return and record low mortgage rates, and low private student loan rates. That makes 2021 a great time to refinance and lower your monthly payments.
3. Create a budget
If you’ve never tried a budget, I highly encourage it. Having and following a budget provides freedom. Try it!
There are many different methods out there to use. Envelopes, spreadsheets, and on-line tools and apps that are either free or are for a price. Pick one that sounds like it may work for you and try it in 2021.
4. Pay down credit card debt
If you have credit card debt, make it a goal to end 2021 with NO credit card debt. If you have a balance on more than one card, I suggest paying off your smallest balance first while paying just the minimum on the other card. Then when the smallest card is paid off then tackle the next largest one. See my blog post for more info on that.
5. Automate your savings and giving
If you ever have good intentions to save more or give to your church or favorite charities more consistently then automate those payments. There are two ways to do this. First, many employers allow you to divide your paycheck so that different amounts go into different accounts. Second, you can set up automatic transfers with your bank. Whichever option you choose, make it a priority to have your savings and giving automated.
6. Start an emergency (“rainy day”) fund
Make sure you have an emergency fund. If you need to make a car repair or meet an insurance deductible having the money saved will ensure you don’t have to put this on a credit card.
Set a savings goal…perhaps $1,000? To get there determine an amount you need to save each month ($1,000/12=$83). Set up automatic monthly contributions to make this easier (See #5)
7. Invest more
The emergency savings fund is great to give you piece of mind to cover a car repair or medical bill. But what if you lost your job or need to buy a new car or save for a house?
How much peace of mind would you have if you had 6 months-worth of expenses in savings? Make it a goal to end the year with 2 months of additional savings. So, if your expenses are $5,000/month then and the year with $10,000 of additional savings than you have now.
8. Boost your retirement savings
Saving for retirement is clearly one of the most important parts of a sound financial plan. In 2021, there are two things you can do which could be meaningful to you down the road.
- If your employer offers a 401(k) or 403(b) match, be sure you’re contributing enough to get the full match since that’s literally free money.
- If you are already at the full match level, or your employer doesn’t offer a match then contribute an additional 1% to your retirement savings.