2020 was a year full of uncertainties in terms of health, job security, and finances due to the COVID-19 pandemic. To avoid making the same mistakes in 2021, prepare for unexpected life events in the new year by setting your own personal financial goals. Here are just a few goals to consider when looking at your personal finances for 2021.
5 Financial Goals to Set in the New Year
Every individual has a different plan for their finances—whether it be to save for a large financial purchase such as a home, a car, or to set aside some money for retirement, the possibilities are endless. Regardless, setting a plan to achieve a goal is important to keep in mind for the new year. Here are 5 goals to set for 2021:
1. Create a monthly budget
Although this may seem like a small goal to set, your spending costs do add up over time. This is the first step to gaining control over your finances. If you’re able to write out a monthly budget, it can keep you from spending more than needed and allocate every dollar unspent in a specific place. There are many resources available to help keep track of these transactions—whether it be downloading a personal finance app such as MobiMoney, a free service offered to Family First members, creating a spreadsheet, or pursuing a financial counselor. Researching which option is right for you plays a crucial role in starting your savings.
Learn more about the benefits of leveraging MobiMoney today. For more information, read our blog on Taking Control of Your Finances with MobiMoney.
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2. Cut Spending
Regardless of your personal finances, it’s important to find where you can decrease your spending in your budget. A good goal is to find a specific area within your spending expenses in which you can focus on cutting back spending. For example, take a look at how much you spend monthly on food. Eating out or getting take-out can be a huge culprit to unnecessary spending. Every penny matters, even if it’s just a $20 meal a week, so start looking at your expenses in the new year.
3. Save up for an emergency fund
With the uncertainties that 2020 has given Americans in the last year, it makes sense to prepare for what 2021 may have in store for us. With the ongoing pandemic, it’s time to prepare for the worst-case scenario. How much you decide to allocate to an emergency fund depends on your current situation. If you are currently working on getting out of debt, it’s important to at least have a smaller emergency fund—whether it be a $500 dollars or $1,000 dollars, it is important to allocate some sort of amount. If your job is more volatile, try to aim to save 3-6 months worth of your living expenses.
4. Pay off debt
Americans carry an average personal debt at around $90,000. If you are able to, completely getting rid of your debt is ideal depending on your income and the amount of debt you currently have. Create a goal to pay off a certain amount of your individual debt. After prioritizing your monthly expenses for necessities such as food, rent, and utilities, deciding on a goal for a total year debt payment is the next step. Once you decide on how much you’d like to pay off by the end of the year, work backwards in determining how much you are able to pay towards that debt monthly.
5. Start saving for retirement
If you are working a full-time job, consider contributing the maximum amount that your company will match towards your 401(k). If you are completely debt-free, try allocating 15% of your earnings towards your retirement. If you are still working on paying off personal debt, a good rule of thumb is allocating 5% of your earnings towards your retirement fund. Other possibilities such as a ROTH IRA or a traditional IRA are available to you if your employer does not have a 401(k) option available to you.
Contact one of our Financial Counselors or speak to one of our experts to start planning your 2021 today.
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