5 Financial Resolutions to Take On in 2021
4 min. read
By: FCU Team
New year, new you! Get familiar with some resolutions and strategies you can employ in 2021 to achieve greater financial independence and stability.
Before we get to the resolutions, let’s discuss some tips that can aid you in determining which resolutions you might want to take on, as well as improve your chances of sticking with them!
Specificity is Key
When setting your goals for 2021, be as specific as possible. While saying, “My goal in 2021 is to save more money,” may sound like a solid goal, it lacks a way to measure success. Instead, get more specific!
Telling yourself you want to save $500 dollars a month, or create an emergency savings fund of six months’ worth of expenses are more clear and assessable goals. Being thorough in your goal setting will allow you to track your progress throughout the year!
On that note, be sure to check-in with your goals periodically throughout the year to see how you’re doing. If you think you may have been overzealous in your goal-setting, it’s perfectly fine to modify your resolution accordingly as long as it’s within the spirit of the original goal. Measuring your progress may also give you a boost of confidence and remind you why you made your resolutions in the first place.
Stumbles Are Expected
Whatever the resolution, it’s likely you will face obstacles along the way. If you’re trying to save a specific amount of money per month but an emergency comes up that ruins your budget for the month, don’t be too hard on yourself! Let it strengthen your resolve and promise to get right back to your plan as soon as you’re able to. You can stumble – just don’t fall!
What Resolutions Should You Consider?
Create and Follow a Budget
Budgets can provide you with a thorough understanding of your financial situation since you’ll need to keep track of all income and expenses. More than that, they’re a great way to plan with a goal in mind.
Most folks struggle with calculating their monthly expenses, as some are easier to track than others. If you have to pay rent or a mortgage for example, that’s a consistent payment every month that you can plan for, a fixed expense. Other expenses are tougher, like how much you spend on groceries each month. You could call these variable or irregular expenses.
Track your expenses for a month, or look at your monthly and recurring expenses in previous months. You can use this historical data to calculate an average spend for each category. Doing this will allow you to identify where you’re spending too much money. You may find that you’re eating out too often, or spending too much money on extras like streaming services you don’t regularly use.
Going back to our advice about specificity, don’t forget to have a reason in mind for creating a budget, such as saving a fixed amount of money per month. If you’re an FCU member, our online and mobile banking has tools built in to help!
Whether it’s creating a debt payment plan or eliminating debt entirely over the course of 2021, any efforts to ease the stress that can come from debts is a good move. There are two widely recommended strategies you can employ, the debt avalanche and debt snowball methods.
The debt avalanche method prioritizes paying off the debt with the highest interest rate first. During the month, you pay the minimum payment on all your debts and use the remaining money you have on the debt with the highest interest. Using this method, you may save money on interest in the end.
The debt snowball method prioritizes paying smaller debts off first before moving on to the next one. The main advantage of this method is it creates momentum and provides motivation as your number of debts grows smaller.
Improve Your Credit Score
A credit score is the all-important number that will be a determinant for many financial decisions in your life. A higher score means more loan options with better rates, so it’s in your best interest to raise your score and keep it high. Make a commitment to stay mindful, check your score relatively often and track its progress.
Create an Emergency Savings Fund
Having an emergency fund to contend with unforeseen issues, like car maintenance, medical bills or even a once-in-a-century pandemic, is more important than ever. So, how much should you keep in your fund?
We recommend that you keep three to six months’ worth of expenses in your fund. The COVID-19 pandemic demonstrated how vital it is to have money set aside for emergencies, and we should take that lesson to heart.
Save Money for Retirement
Look at each of your expenses. Your mortgage (or rent), how much you pay for groceries and utilities, your car and more. If you retired at this time and started taking social security every month, would you be able to maintain your current lifestyle? The answer is very likely no, which is why it’s imperative to be able to supplement social security with your own savings. Whether it’s looking into CDs, IRAs and Money Market accounts, a 401(k), your own savings or investments, it’s never too early to start taking your retirement seriously!
Here for You
Whatever strategy or goals you decide on this year, know that we’re here for you! Florida Credit Union’s online and mobile banking is a great place to start. Check out our video on the financial wellness tools available on FCU Anywhere and the features we offer that could help you in your financial journey. In addition, we also have financial calculators and financial education playlists through EverFi designed to help even the most seasoned members.