2020 is about to end, so it’s a great time to create goals for the new year that is just around the corner. Most people fail on their resolutions, so it’s essential to set small measurable goals instead of big abstract ones and keep track of your progress throughout the year, not to set yourself to failure. Here are seven essential financial resolutions for 2021:
1) Start a Budget
Knowing where your money is going can be life-changing for your finances. By creating a budget, you will be able to see the spending areas you can improve that you wouldn’t have seen otherwise. It takes a while to form a new habit, so give it a try for at least 30 days. You can do it with a pen and paper and write all your fixed expenses, and the rest of the money can be spent on entertainment and savings. If you prefer, you can also use apps to start budgeting, and there are many free options you can choose from.
2) Pay Off Debt
Owing can cause a lot of anxiety and stress. Paying debt off is not easy, but it can definitely be done. The first step you’ll need to take is writing all your debt on a piece of paper or application, create a plan, and include this goal in your budget to make it more actionable. It’s also good to find other ways to make more money, such as a side job or selling used stuff you don’t need anymore.
3) Boost Your Credit
Is your credit bad? Having a good credit score is crucial if you want to get good interest rates for loans, credit cards, and insurance. It can even affect whether you get a job or not since some employers run credit checks. You can do some things to boost your credit, such as paying your bills on time, not applying for too much new credit in a short period of time, disputing credit errors, among other things.
4) Save Money
Do you live paycheck to paycheck and never end up saving money for your goals? If you struggle to save money, you can start small by allocating 10% of your income to a separate high-yield savings account as soon as you receive your salary so that you’re not tempted to spend it somewhere else. You can also set a target of, let’s say, $1,000 so that you can make it more actionable than just saying, “I’m going to save money.” Another option is using cards like the one that Chime offers that rounds up purchases to the next dollar and saves the rest to a savings account.
5) Begin Investing
A common misconception many people have is that investing is only for wealthy people. But that is simply not true. Anyone can invest, and you can do it with little money. For instance, most high-yield savings accounts don’t require a minimum balance to invest; you can also start investing in real estate for as little as $500 through crowdfunding, use a robo-advisor with as little as $100, buy fractions of shares with stock trading apps such as Robinhood, among many other things.
6) Take Advantage of Rewards
Do you only pay for your purchases using debit cards or cash? There’s a big chance you are missing excellent rewards. Credit cards are excellent tools if used responsibly. They offer benefits such as cashback, airline miles, insurance, free hotel nights, lounge access, and they can even help you boost your credit score.