If 2020 taught us anything, it’s the importance of preparing for the unexpected. Likely there will be more surprises in 2021, so, we need to be ready. Here is a list of things to start doing in 2021
1) Establishing an Emergency Fund
Establishing an emergency fund is crucial when it comes to being financially ready for medical emergencies, house repairs, car maintenance, etc. Dave Ramsey recommends three to six months of expenses be tucked-away at any given time. Without an emergency fund, any unexpected event, even a small one, could set you back significantly.
2) Creating a Savings Habit
Having a “savings mentality” should be a life style, not just something done once in a while. Science say if we do something for 60 days, it rewires our brain and creates a new behavior. To turn your ability to save money into a regular habit, try:
- Setting a specific goal for yourself and your savings
- Creating a system for making consistent contributions
- Monitoring your progress
- Rewarding yourself for meeting your goals before setting new ones
3) Manage your Cash Flow
Managing cash flow is just a fancy phrase for “budgeting”. Budgeting is merely telling your money where to go. You need to start before the month begins and map out your income for the upcoming month and make categories for that money. Once the month begins, track your spending. Keep a balanced checking account and keep tabs on the amount of funds spend for each category.
4) Take Advantage of Additional Money Coming In
Whether you get a bonus or an unexpected inheritance, consider putting that extra cash towards your emergency savings. This is a great time to either get ahead or catch up if you were not able to contribute as much as you would have liked another month. Many have received COVID-19 stimulus checks. Utilize those funds for saving rather than spending if needed.
5) Setting Goals
Ask yourself what you want to accomplish in the months to come. Is there a certain amount you’d like to have tucked away in your savings? Or maybe you’re focused on getting a promotion at work? Whatever it may be, set a specific goal that you can focus on working towards in 2021. In a world where we’re all recovering from economic and environmental hurdles, progress is worth celebrating and worth pursuing.
6) Remember Your Retirement Savings
Once you establish a fully funded emergency fund, 2021 may be the year to focus on your savings for retirement. If you have a 401(k), 403(b) or IRA, ask your retirement profession if you’re adding enough to it or if you should be upping your contributions each month. If you haven’t reached your contribution limits by the end of the year, consider making additional contributions.
Need a JUMP-START for 2021 Join us for JUMP-START Virtual on January 21st at 9am.
This is a no-cost event, but you must register to reserve your seat.