5 Financial Goals That Everyone Should Set in 2021
Let’s cut to the chase: 2020 has been a real haul. With brighter days ahead, it’s time to start gazing into your financial future. More specifically, it’s time to set some goals to make your accounts healthier and more robust than ever by this time next year.
1. Create a Budget
More and more Americans are living beyond their means. To avoid a pile-up of debt, create a budget. It can feature a variety of things, but at a minimum, it should include:
How much money you make or receive (after taxes)
How much you’re spending
How much you’re saving
Using a budget has myriad benefits because it makes it easy to spot where your money is going every month. This is especially useful if you’re trying to increase your savings or reduce debt. You might be shocked to find out how much cash you’re wasting on mediocre coffee shop brews, for example, or discover you could sock away much more money each month by putting your library card to use.
2. Get On the Same Page With Your Spouse
I mean this literally. Use Excel or Google Sheets to create a shared budget spreadsheet that you can both easily access anytime, anywhere. Sharing info this way makes it easier for you both to stick to an agreed-upon budget and spend responsibly.
Making expenses public knowledge (or at least public between the two of you) is also an easy way to boost accountability and discourage frivolous purchases. It’s far more difficult to dish out $220 for fish tank supplies when you know your partner will soon thereafter ask, “Hey, what’s this $220 at Cincinnati Pete’s Aquarium Shack all about?”
3. Plan for Any Big, One-Off Purchases
The start of another year is the perfect time to assess your, your family’s and your property’s needs. Are there any big expenses on the horizon, such as a roof repair, medical procedure or even a big family event to celebrate? Start setting aside money for it now. Write it into your budget, in fact. That way, when your foundation sports a crack or you’re left footing the bill for Great-Aunt Ida’s 90th birthday bash, you’ll be ready.
4. Start an Emergency Savings Account
In addition to forecasting big, one-time buys, it’s just good sense to have an emergency stash of funds available to you in the event that your financial situation as a whole changes considerably and unexpectedly. Most experts recommend saving enough money to cover living expenses for three to six months.
If you’re retired, opt instead for investing a year’s worth of living expenses in a savings account, short-term CD or money market fund. Making a conservative investment like this can help you recover from a setback more easily.
5. Acquire Better Debt
All debt isn’t created equal. Debt isn’t necessarily a bad thing to have, either. Debt is how most people can afford to buy a home or car; it’s the only way to go to college for far too many students these days. The key is to be smart about how much and what type of debt you have. In 2021, set three goals for your debt:
Pay your credit cards off each month to avoid an interest-bloated balance
Avoid taking out loans for items that only depreciate over time, such as vehicles
Keep your total amount of debt under 35% of your income before taxes
The start of a new year is the perfect time to regroup and reboot. If your finances need a little kick in the pants, work toward these achievable goals to decrease your financial burdens and make 2021 the best year yet for your bank accounts.