Don’t Wait Until 2021 to Refresh Your Finances. Do These 5 Things Now
There is no need to wait until 2021 to get a fresh start on your finances.
It’s been an extremely turbulent year for the economy, never mind our household finances. We normally create new budgets at the top of year—if ever—but let’s be real: any plans you made at the beginning of 2020 have likely been distorted.
Plus: the sooner you make a financial resolution, the sooner you can start making it come true. Why wait til January?
Reset your budget
If you had to start over and create a whole new approach to spending, how would you categorize your needs versus wants?
Take the time to ask yourself: What are my priorities right now? How have my needs changed, and does my budget reflect this? We’re learning so much about our true needs in this pandemic and the things we can live without or do on our own. For example, I’ve learned that I don’t really need a gym membership or to get my hair professionally colored. The $29 home hair kit gets the job done! Instead, I’d rather invest those extra dollars and contribute more to charity and travel.
What are you willing to cut out for good? And maybe replace with more meaningful ways of spending and saving?
Make a new resolution.
Don’t wait until the end of the year. Give yourself a running start.
Say you want to pay off some high-interest debt, or put away money for a big purchase like a car or a house, or invest more. In the next few months, you can at least start to get in the mindset and create a plan, giving you a better chance of hitting the ground running in January.
One way to jump start your financial resolution is to do a mini challenge before the end of the year. Go on a spending freeze for a week or two, or stash $5 every day for a month.
Get organized. Write down all your financial vitals—how much you owe, how much you’re making, where you’re spending it—and use the information to make a realistic plan. If you’re really stuck, you might consider signing up for a free credit counseling session.
Check your credit.
Whether you’re interested in relocating in the upcoming months as a renter or buyer, or financing a new car, your credit will play an important role. Best to check now to see where you stand. If your score isn’t in the mid to high 700s, use these next few months to focus on paying down debt and making sure bills get paid on time to raise your score. A higher score can mean lower rates on loans in the future, which is more money in your pocket.
Ask for a raise.
It may seem strange to ask for more money in a pandemic, but don’t feel awkward. Your company is benefiting from your contributions in a very rough time.
When negotiating a raise, timing matters. Typically, it’s best to ask before annual budgets are locked, which often happens at the end of the year. Now’s your time to ask if you feel you’ve been pulling a lot of weight to support your team and company over the last several months.
Catch up on investing.
If you paused on any retirement investing this year, see if you can get back on track.
You have until April 15, 2021 to make 401(k) or IRA contributions with your 2020 income. But starting the refresh now means you can better pace yourself. For example, if you’d like to make the maximum yearly investment of $6,000 into an IRA, you can set a goal of saving $1,000 every month from November to April. And if you have access to an employer’s 401(k) program, request to open now—you may have to wait a few paycheck cycles before it takes effect.
One last thought: if you’re looking for resolution ideas, consider building an emergency fund. If 2020 taught us anything, it’s to expect—and be prepared for—the unexpected.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal.