Four Key Financial Resolutions For 2021
Financial resolutions for 2021 are going to be more popular than ever with the current state. If you have your list made, the key will be sticking to it.
Here are six key financial resolutions that will help increase your financial standing in 2021
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Financial resolution 1: Create a budget
Here are steps that can help:
- Have a budget – You have probably heard the phrase pay yourself first. In order to make sure you have a strong hold on your finances, you need to know what is coming in, what is going out and how much you are saving. If you haven’t been tracking your spending, generate a 30 day spreadsheet worth of expenses. Gather your fixed monthly expenses along with how much you want to stock away for other financial goals like retirement.
- Figure out what your personal net worth is- Take your assets and subtract what you owe. That’s your net worth. You just want to make sure this number is going up over your earning years.
- Think about big-ticket items- This looks like college tuition or a big house repair. Start putting money aside for this in something relatively liquid like a savings account or certificates of deposit (CDs).
- Create an emergency fund- Gather three to six months’ worth of your essential living expenses. This should be put aside in a savings account.
Financial resolution 2: Manage your debt
Debt is a tool that needs to be used wisely and is inevitable for most people. This practical necessity will get you into a home after all. The problem arises when debt becomes the default for spending money. Here are tips to manage your debt.
- Watch your debt load- Just because your credit limit is $5k doesn’t mean that’s what you should borrow. If you are purchasing a home, keep your loan amount below 28% of your pre-tax income. In addition, your total monthly debt payments which includes your car loan, should be below 36% of your pre-tax income.
- Try not to carry debt. Pay credit cards off in full each month.
Financial resolution 3: Prepare for the unexpected
If the current times aren’t a clear indication, your financial life can be upended at any time. Insurance will help protect your finances against unforeseen events.
Here are some guidelines that will help you prepare for life’s unexpected events:
- Get health insurance – If you’re in good health, look into a high-deductible policy. This will help to insure you against a potential serious illness or any other unexpected health-care event.
- Purchase life insurance- If you have dependents, this is essential. If your employer offers access to a group term insurance policy, take advantage of that first. If not, consider a low-cost term life insurance policy.
- Look into long-term disability insurance – Becoming disabled is not the most unrealistic things. In fact, according to U.S. disability statistics, a 25 year old has an almost 60% chance of becoming disabled for 3 months or longer prior to age 65.
- Protect your physical assets – Review your homeowners insurance and auto insurance policies to ensure you have appropriate coverage.
- Create a disaster plan – For your peace of mind, take time to review your homeowner’s or renter’s policy. Also be sure to maintain an updated video inventory of your household items and possessions.
When it comes to important paperwork, be sure to store everything in paper form and on a portable hard drive. You should also make sure to have copies of originals of your birth certificates, passports, wills etc.
Financial resolution 4: Use Your credit cards wisely
We all have credit cards and they can be used to your advantage. Go with credit cards that have rewards and benefits that will add up to more savings for you. Everything from money back, points, airline miles, car rental insurance etc. There are credit cards that can fit with your goals, interests and habits. Websites like CompareCards is good for seeing which cards would best fit your lifestyle.