7 Financial Resolutions to Get You Started in 2021

1. Make a budget

You won’t know where your money is going until you track your expenses. You might be surprised how much you spend on various items. You’ll also find ways to reduce some expenditures. That puts and keeps money in your pocket. Of course, some of us are saving due to the pandemic. We miss restaurants, concerts, movies and sporting events. But what new habits have we learned in 2020 that we can carry over into the new year?

2. Establish an emergency fund

According to: [https://www.bankrate.com/banking/savings/financial-security-june-2019/]: Nearly 30% of Americans don’t have savings for an emergency. Start with the stimulus money Congress gifted you, and gradually save until you have at least three months you can
set aside in the event of an emergency. Six months is even better.

3. Start or increase saving for retirement

Maybe you don’t think you can afford it. But let’s view this from another angle. When an unexpected bill comes in, we always seem to find a way to pay for it. If your car breaks down, you know you’ll need to get it repaired. Look at retirement as your car that needs to be fixed. One easy way is to sign up for automatic contributions into your 401k or IRA. Do you want to save 10% of your income? But does that goal seem out of reach? Then start with baby steps—two or three percent of income will be your starting point. Then double it in April and increase it by the same amount in July. Continue every three months until you hit your goal. That’s how I began socking funds away for retirement and what I impress upon my daughters.

Pay down and pay off debt

You’ve created a budget, but debt continues to weigh on you like an anchor around your neck.

You know the feeling. Put away your credit cards until they are paid off. Pay more than the minimum balance and focus on high-cost debt first. When one card is paid off, put that payment towards your next loan. You’ll be surprised at the headway you’ll make. And one more thing. When you’ve paid off a loan, reward yourself.

Simple rewards are excellent incentives that keep you on track.

5. Keep debt reasonable

If you have all your credit card, student and auto loans paid off, you are ahead of the game. But just because you can borrow doesn’t mean you should. Keep monthly outflows for your home below 28% of your pretax income and your total monthly debt payments (including credit card, mortgage, auto, and student loans) below 35% of your pretax income. These principles will help keep you on sound financial footing.

6. Contribute to a cause near and dear to your heart

Consider incorporating regular financial gifts toward your favorite charity or charities. Can you set up an automatic donation? If so, even a few dollars each month means you will be making a difference. Or, you may choose to volunteer your time.

7. Get your affairs in order

Finish setting up a will or trust, update your beneficiaries, update life insurance, and consider a living will. A living will reflects your preferences to close family or friends regarding end-of-life medical treatment. Also, consider a durable power of attorney, which allows someone to make health-care decisions for you if you are incapable of doing it yourself.