10 Ways to Reset Your Finances Before 2021
2020 may have wreaked havoc on your finances. Here’s your roadmap to financial recovery in 2021.
The holidays can seem like open-season on your budget. Between all the travel, holiday shopping, and of course, your own beauty needs, it can get PRICEY! Staying on budget is always important, but even more so with all of the economic uncertainty due to the coronavirus pandemic. 2020 may have been a year of setbacks on multiple fronts, and I think we are all looking forward to normalcy and dare I say fun, in 2021. The coming of the New Year also brings the chance to make some much needed financial adjustments! Here are 10 ways to make 2021 a better year for your finances, no matter how they were impacted by 2020.
10 Ways to Reset Your Finances Before 2021
1. Invest in Yourself
Your education is an investment that will pay dividends. You may have finished school years ago or still be in the thick of it, but you can always learn something new. It may be something that can help you earn money, like a photography class or professional certificate. But it can also just be something that enriches you as a person, improves your mindset, or keeps you inspired.
2. Start an investing fund
If you’ve been timid about investing, this time of year is perfect to start taking baby steps. I began regularly stashing funds in my brokerage account so I’m ready to buy stocks when I see an opportunity that can’t be missed. I automate $25 a week and that’s all! I know saving can be tricky and investing can be downright scary – especially in a pandemic induced recession. I started with an amount I was comfortable with, and so should you!
3. Start tracking your expenses
Have you ever looked at your bank account balance and wondered where all your money was going? I’ve definitely had several of those moments this year, even before losing my job due to covid. My husband and I did some serious financial reviewing earlier this year and decided to start meticulously tracking our spending and saving. I started an Excel spreadsheet with our fixed expenses (things like the mortgage and phone bill) and variable expenses (things that can be different every month, like groceries, travel, dining out, fitness, hair/beauty, etc). It was such an eye opening exercise!
Now every time we spend a dime, we log it in the spreadsheet and monitor our totals as we go. The most important thing about securing your financial future is to have control over your present! Start keeping a close watch on your transactions so you can then figure out how to adjust your budget or where you need to cut back.
4. Get ready for tax season
Tax season is dreadful, but also inevitable. Make it less of a hot mess by organizing your financial documents meticulously and finding a tax preparer or CPA that you trust. Organization is super important if you have a lot of miscellaneous income, like from side hustles or freelancing. And the best way to maximize your return is to work with an expert that can thoroughly review your financial situation and know what deductions you qualify for. I like to start the year with a clear picture of what my return or liability might be. If it looks like I’m likely to get a good return I’ll file early. But when you have a lot of income from blogging or other side hustles that doesn’t get taxed throughout the year you may be likely to owe. If that’s how it looks I’ll hold off on filing until the deadline so I have more time to get that payment ready.
5. Set Financial Intentions
One of the pillars of financial success is staying motivated and intentional as you go along your financial journey. Intention setting is similar to goal setting, but there is one key difference. Goal setting is all about deciding what you hope to accomplish. Intention setting is about your attitude and focus. Your financial goals may look something like “save X amount of money a week” while your intentions can be more about improving your relationship with money. Think of a few financial intentions that will add depth and focus to your financial journey.
6. Negotiate with Your Banks
Chances are you are paying way too much interest on your credit cards. The Fed has been slashing interest rates like crazy and you should be benefitting from that. Call your credit cards and negotiate lower interest rates – most will very quickly agree. And be sure to periodically request a credit line increase. You should NEVER be maxing your cards or getting credit line increases so you can overspend. But having a higher credit limit can be a big boost to your credit score, and that will come in handy for everything from opening new accounts to eventually buying a place.
7. Set Financial Goals and Milestones Along the Way
Setting financial goals is essential, but it can be intimidating or seem unrealistic. Try setting milestones to make your goals seem more attainable and keep yourself accountable. Instead of saying you want to save $1000 this year, try breaking that down to a monthly goal or a weekly goal. You can even create a bonus if you hit your target early! And be sure to leave time in your schedule to review your progress, make adjustments, and stay educated on your personal finances.
8. Cut Out the Financial Clutter
You’ve probably got something costing you money or tempting you to spend. Audit your accounts for recurring charges, magazine subscriptions, or any miscellaneous automatic deductions, even small ones. And think about eliminating things that make you want to spend. You don’t need daily emails from every retailer or department store!
9. Start a Side Hustle or Make Yours More Profitable
People have been raving about the need for multiple streams of income for years, and can you blame them! The events of 2020 have only reinforced that messaging. If you don’t already have a side hustle, think of something you love to do that could be monetized. It can be anything from at home hair styling services to digital consulting. If you already have a side business, think about ways you can level up and maximize your earnings. Your financial stability can depend on it!
10. Manage Your Savings and Retirement
Even though retirement for me is still 30 something years away, planning for it seems so relevant right now. Every time I turn on YouTube I hear someone talking about the FIRE movement or balancing your portfolio. If all of that seems intimidating and makes you want to shut your laptop down and run, consider bringing on a professional. If the DIY approach isn’t for you, consult with a financial advisor to get some expertise on a retirement strategy that will meet your goals. Whatever you do, don’t put off thinking about retirement until you are in your 50s!
2021 is only 1 month away. Hopefully the 10 things in this article will help you make 2021 your best financial year yet. No matter how hard 2020 may have hit your wallet, you can plan carefully and get a jumpstart on your 2021 finances and securing your financial future!
