Now is the time to think about the upcoming financial year. Hopefully, we have learned some lessons because of 2020. For many of us, that lesson is that we need to be prepared for financial emergencies.
Here are the money goals that you need to set for the new year.
Start An Emergency Savings
Caught with your pants down by this pandemic? You are not alone.
With the massive loss of income that Americans faced, the need for an emergency savings has never been clearer. Unfortunately, very few of us have one. Let’s correct this. Make your first goal of 2021 to set up an emergency savings.
The first thing that you need to do is open up an account. Easy enough, but you should open up the right kind of account. The first thought would be to just open up an account at the same bank that you have your checking, but that would be a mistake. A better option is to open an online savings account.
Online savings have the advantage of being accessible, but not too accessible. You can transfer money out of them but it will take you a business day to get it. If you get a savings at the same bank as your checking, the money would transfer instantly. That does not give you a cool down period which can keep you from raiding your savings for trivial matters.
Once you have your account set up, you need to fund it. The best way to do that is to set up automatic transfers from your checking to the new online savings account. Make the transfers the morning that you get paid and you will never notice it missing.
If you are not used to saving, start small. Even 25 dollars a paycheck will add up to over 600 dollars over the course of a year. Ideally, you should be saving 10 percent of your net take home pay, but start slow and work your way up.
Make More Money
Everyone says that they want to make more money, but very few people do anything about it. Make it a point to make more money in 2021. Money beyond the minor “cost of living” increase that most employers dole out.
There are two ways to make more money this year. The first is to change jobs. Dust off the resume and start applying with other companies. The days of being rewarded for your hard work and loyalty are over. Companies save the big money to attract new hires, hoping that their current employees stay complacent. If you want a big raise, 10 percent or more, you will need to apply elsewhere and make a move.
Another way to make more money is to pick up a side job. If you are working a standard 40 hours a week, you most likely have time to pick up a side gig. Even just one shift a week working retail could get you 6000 dollars in additional annual revenue.
If you are not into punching the clock, start a side business. Cut lawns, sell your crafts, design websites, etc, etc. There are literally dozens of side businesses that you can start with limited to zero start up costs.
Cut Your Expenses
If you are like most Americans, you spend too much money and you have no idea where that money is going. Correct that issue in 2021 by slashing your expenses by at least 10 percent. You can then divert that money into something worthy such as a retirement savings account.
The first step in cutting those expenses is to write out a budget. Sounds complicated, but all that you really have to do is write down a list of all of your expenses. Be sure to include set amounts for variable expenses such as food and entertainment. If you have a hard time making a budget, simply get a notebook and write down everything that you spend money on.
Once you have your list, you can go about trying to make some cuts. 10 percent seems like a lot but it is easily attainable. If you still have cable, now is the time to cut it. If you have not shopped your auto insurance in years, do it. A lot of these little cuts can add up in a big way. For even more cuts, consider making some bigger changes like switching to a cheaper car or even moving to a more affordable home.
Making budget cuts is never fun, but if it could prevent another year like 2020, it may well be worth it.
Start Planning For Retirement
The time to start planning for retirement was yesterday, in lieu of that, start in 2021.
First and foremost, if your work has a 401K, make sure that you are maxing out your employer contribution. If you are not, then you are just throwing money away.
Beyond that, first build that emergency savings and then open a retirement investment account. For best results, consult a retirement planning professional. There are a lot of options and most people need help choosing the right path.
