2020 is a year most of us would prefer to forget. When the year started, nobody expected the COVID-19 pandemic or the tough financial times for many that followed.
Having said that, 2020 is now behind us! We are into the first few days of 2021, and it’s time to look forward. We have outlined a few financial suggestions to take with you from the lessons learned in 2020 into 2021.
Establish an Emergency Fund
If 2020 taught us anything, it’s the importance of preparing for the unexpected. Establishing an emergency fund is crucial when it comes to being financially ready for medical emergencies, house repairs, car maintenance, etc. Living at the Jersey Shore, here in Monmouth County, isn’t cheap. It’s important to have money readily available.
Money tucked away in an emergency fund is meant to help cover the costs that are not part of your normal monthly expenses. Without an emergency fund, any unexpected event, even a small one, could set you back significantly. While you may not be able to put the same amount away every month, every little bit helps, and it’s important to put aside what you can.
If you were forced to dip into your emergency fund due to the tough times in 2020, that’s okay. That’s what it was there for. But don’t forget to refill that emergency fund in 2021.
Save More Money
You’ve heard the phrase, “Every little bit counts,” all your life – but it couldn’t be more true. If you enjoy grabbing a Rook coffee before work, maybe consider brewing some at home a few days a week. We’re not suggesting simply making coffee at home will make ALL of your financial problems disappear, but small lifestyle adjustments can make an impact on your monthly cash flow.
The beginning of a new year is a perfect time to review your spending habits from the past year. This year, it will be important to see how you spent your money in 2020 considering how different a year it was. With things not fully back to normal yet in 2021, it could be smart to factor in some of the new spending habits you may have established last year.
Review Your Tax Situation
With tax season approaching, there are a couple of things you could consider doing now to maximize the financial impact of your tax refund. For example, you may find it more beneficial to have your refund split between paychecks throughout the year. To do this, you would need to adjust your tax withholdings with your employer. Now’s an ideal time to speak with your financial advisor, CPA or other financial professional to discuss what changes you should be making now to get the most out of your tax situation for the coming year.
The goal for many people in 2020 was just to make it through. Which, given the circumstances, was a fair goal to have. A new year gives you a new chance to reset some goals that may have been pushed off in 2020. Ask yourself what you want to accomplish in the months to come. Is there a certain amount you’d like to have tucked away in your savings? Or maybe you’re focused on paying down debt? Whatever it may be, set a specific goal that you can focus on working towards in 2021. Specific is the key word here. Without specificity, our goals become less tangible and easier to forget.
In a world where we’re all recovering from economic and environmental hurdles, progress is worth celebrating – and worth pursuing.
It’s 2021. There is safe, efficient, secure technology at your fingertips. Automation is an incredibly effective tool when it comes to working toward and achieving your financial goals.
Some things to consider automating include:
- Bill paying
- Loans (Your mortgage, student loans, car payments, etc.)
Automating as much of your financial life as you can takes the human connection and decision-making out of the picture. It cuts down on late payments, and it can make contributing to your savings account hassle-free. When it comes to your finances, the less emotion the better.
Remember Your Retirement Savings
2020 was a year of survival in the present day for a lot of folks. Retirement was potentially one of the last things on your mind. For others, 2020 was an opportunity to sock more away than usual, since big expenses like vacations, concerts, weekend trips, etc. were canceled.
With enough stashed away in your emergency fund, 2021 may be the year to focus on padding your savings for retirement. If you have a 401(k), 403(b) or IRA, ask your financial advisor if you’re adding enough to it or if you should be upping your contributions each month. If you haven’t reached your contribution limits by the end of the year, consider making additional contributions – maybe from an end-of-year bonus or other additional income.
You don’t HAVE to wait until January 1st to make big, sweeping changes in your life. But since we’re here already, there’s no better time! Whether the changes are big or small, any step in the right direction is a positive development towards a healthier financial life. If you have any questions about how to set goals, attack those goals, or figure out your financial life – give us a call! We would be happy to speak with you. Click this link to schedule an initial call with our team! There is no cost or obligation.
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