Make 2021 your year of financial confidence! Financial confidence means cultivating good financial behaviors and knowing how to develop self-control around money.
COVID-19 and the financial crisis of 2020 caused millions of people to change the way they deal with their finances. As Americans recover from the recession and unemployment, many are wondering what steps they should take to put themselves in a stronger financial position in 2021 and beyond. Your attitude towards money can mirror how you handle money, so fostering a more positive mindset can prove beneficial for your bottom line!
5 Steps to Achieve Financial Confidence
It’s common to become overwhelmed with financial goals, often leading to feelings of frustration and helplessness. However, there is an antidote – introducing bite-sized goals to the rescue!
Small strategic steps taken over a period of time can produce lasting results. To move towards financial confidence, we’ve outlined five steps. You don't need to do them all at once – you only need to pick one and get started.
1) Label your transactions
Make sure to label all your transactions. This can help you see exactly where you’re spending and keep expenses organized during the month. To start, keep the labeling simple—try using the fixed, living, miscellaneous, and charity expense model:
Fixed expenses remain the same every month. These include rent or mortgage payments, vehicle payments, insurance payments, credit card payments, or debt repayments.
Living expenses are regular costs that can vary from month-to-month. These include things such as food, electricity, or utility services.
Miscellaneous expenses are non-essential spends. Going out to eat, gym memberships, or entertainment can be considered miscellaneous expenses.
Charity expenses are donated funds. Typical donations include charity groups, non-profit organizations, or churches. Regardless of how you arrange your categories, the point is that you have now taken the first step to financial confidence.
2) Track Your Monthly Expenses
Once you've created a system to organize your budget, you can start tracking your expenses.
To get an overall picture of your financial state, you must gather all your expenditure information. Do this for the previous month up to the start date when you have decided to take hold of your financial life. If this is too overwhelming, try the week before and then go forward.
Spend some time analyzing your account and credit card statements. Are there recurring expenses you need to cut? Maybe you forgot to unsubscribe from that streaming platform that you never use. Or perhaps you didn’t realize how much you were spending at your favorite coffee shop.
The more familiar you become with your expenses, the more you will be able to discover any negative spending patterns. Having this knowledge can empower you to take positive action.
3) Reduce Your Monthly Bills
You can effectively manage your money by lowering your monthly spending.
While you cannot eliminate fixed costs, you can reduce them. If your goal is to pay off all your credit card debt, consider downsizing your apartment to save a few hundred dollars and use the leftover money to pay off bills.
You can also reduce your living expenses. For example, turn off the lights when you leave a room to lower your electricity bill. Pick alternative insurers for your home or life insurance, or purchase your groceries at a bulk discount store to further reduce those expenses.
Next, take the knowledge you acquired after reviewing your account and credit card statements and cut unnecessary expenses. Are you paying for streaming services but never watch shows? Cancel the subscription. Do you buy coffee at Starbucks every day? Consider cutting the expense out completely, or limit your spending to one coffee per week as a little treat.
Here are some other ways to further reduce your expenses:
Cancel Your Cable
Speaking about cutting monthly costs, there's undoubtedly one bill that you should cut immediately: your cable bill. You will save a lot of money every month by doing this.
Don't get us wrong; you don't have to give up all TV entertainment. Exchange your large cable bill for a low-cost streaming service, such as Sling or Netflix.
If you can’t stand the thought of cutting cable, you can evaluate different cable companies and see if you’re getting the best deal. Consider switching to a cable bundle with fewer channels to save some money every month.
Eat Out Less, Eat In More
Are you looking for a straightforward way to take care of your variable expenditures every month? Reduce the routine of dining out. Sure, eating a nice meal at a restaurant is a great experience, but savings will add up if you start eating at home or taking a packed lunch to work instead of eating out every day.
Take small steps and start by eating at home once a week. Then the next week, take lunches to work every day. You will be surprised at how much you save. Read our Budgeting for Foodies blog if you’d like more information on food related savings strategies!
4) Manage Your Loan Repayments
Start small and set small, achievable goals. It may be as simple as checking on your financial tracking once a week or maybe twice a month.
You can also put any extra cash you happen to have towards repaying your loan.
Loans have the potential to flood you with mountains of debt. If you need to refinance or merge these loans, see whether you can apply for loan forgiveness or add them to a debt repayment package. Getting rid of your loans is a huge step in boosting your finances.
5) Save Each Week
Like investments, saving is another gradual route to generating wealth. To improve your finances right now, open an interest-bearing savings account and save regularly.
Take advantage of goal-setting software to track your savings. Florida Credit Union offers financial wellness tools in our online and mobile banking platform, FCU Anywhere!
No matter which choice you select and how much or how little you save, find opportunities to maximize your savings over time. Small winnings can amount to large returns over a lengthy period.
Ready to Take the Next Step?
Whether you want to get back on track with your new year’s resolution or you want to set this goal now, it’s never too late to work towards financial freedom and confidence. By implementing a few or all the steps above, you will move closer towards your financial target. Contact us for offers on valuable banking solutions, including savings accounts, money market accounts, auto loans, mortgages, and more.
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Florida Credit Union is a full-service financial institution. Founded in 1954 as the Alachua County Teachers’ Credit Union, FCU now services over 120,000 members in 48 counties throughout North and Central Florida. For more information on the services we provide, visit FLCU.org or call us at 1-800-284-1144.