The year 2020 is almost over, and it has been the strangest and perhaps the most challenging year for many people. The impact on personal finances has been enormous, and many of us have forgotten or been unable to plan or handle our finances properly.
However, now is a good time to reassess where you are, plan your finances for 2021, and get back on track!
How to Begin Your Financial Planning for 2021?
The first thing you must do is figure out where you are right now when it comes to your finances. How much do you owe and to whom? What are the payback terms and conditions? What will you be earning in 2021? Do you have a current budget?
No matter how it looks, take an honest assessment of all of your financial conditions. And either start a budget or update your old one right away.
Make a List of Goals for 2021
Most of us were unable to meet any financial goals we had for this past year. Many of us were just trying to get by during this pandemic. No matter your current state, start by setting some goals. Make sure they are small steps and not giant leaps. Goals need to be achievable and adjustable to your situation. Your budget should be your guide to what you will start paying off or add to your savings, and so on.
If your employer has a retirement plan, make sure to participate actively. Even small amounts can add up fast over time. Find the expenses you can reduce that are not critical needs, e.g., whether or not to have coffee on the way to work that costs $5 every day, ultimately adding up to $80 per month.
Avoid Adding More Debt during the Holiday Season
We all want to reduce or eliminate our debts. However, during the holiday season, many of us spend way overboard to give gifts to those we love. Set a budget per person and stick to it. Add as little debt as you can and start following your financial plans for 2021 from the very first week.
Make sure to avoid all forms of impulsive buying and keep a record of what you are spending as you go, so that you do not lose track of your overall spend.
If possible, make homemade gifts like DIY home decorating items, baked goods, and more.
Check Your Budget Frequently
Almost all of us have had some impact on our budgets in 2020. Review what happened and what you did to fix the problems that occurred. If you had a pre-existing budget track where you lost control. If you did not have one, set one up today. There are numerous resources in every community that are free and will help you set your budget if you are unsure what to do or where to start.
If you do not have a budget plan, you can try one that has been used for decades. You can assign half of your income to your basic necessities (housing, food, essential clothing, utilities, and so on. Do not spend more than 30% of your income on things you desire to possess but serve no urgent need. Finally, you can set apart the remaining 20% of your income as savings. If you have much debt, use most of this remainder to pay them off.
No matter what, always try to put aside at least 5% of your income as savings. This is a habit you need to form and keep up. It will help you build an emergency fund for times like 2020 and encourage you to save for your retirement as well.
If you are in a short-term, emergency cash crunch, you may consider getting an online payday loan. It is the simplest and easiest form of a payday loan as it only takes a couple of minutes to request and get answered regardless of your existing credit scores