We know financial information can get exhausting, even if it’s useful. That’s why we have simplified the things you need to do for your 2021 personal finance to-do list. This will help you get organized and work toward your financial goals in a tangible way.
So, put your thinking cap on, get out your calculator, and sharpen those pencils. It’s time to go through your 2021 personal finance to-do list.
Know your income
How much money do you expect to bring in this year? To those with regular day jobs and a consistent salary, this answer might seem easy. But some might need to project this based on many factors. Ask yourself these questions for the coming year:
- Are you expecting to get a raise anytime soon?
- Is your income variable? If so, can you project how much you will earn?
- How will overtime pay play a factor in your income?
- Is there a chance you could lose your job?
- Are there other opportunities out there where you could be earning more?
These questions will help inform your income projections for 2021.
Track your expenses
Do you know how much money you spend? Regularly answering this simple question could be the difference between you living paycheck-to-paycheck and saving for your future. Start by taking a close look at how much money you spend in different areas of your life, including housing, transportation, food, entertainment, and other regular expenses.
Budget – zero-based budgeting fits well
Get out that budget; it’s time to track your spending. This isn’t the most fun thing in the world, but it is one of the most important things to do if you want to have a good financial year. Consider using zero-based budgeting to help you plan your spending and savings. With this method, all of your money is accounted for in either expenses, savings, or debt payments. Looking at your budget in this way can be useful in preparing you for the year to come.
Refinance and pay off your high-interest debt
If you still have high-interest debt, there’s no better time to address this problem than today. One of the biggest reasons why people often have trouble saving for retirement is because they continue to carry around high-interest debt. This most often takes the form of credit card or personal loan debt, which carries a much higher interest rate than other forms of debt like a mortgage or car loan.
One way to lessen the impact of high-interest debt is through refinancing. As interest rates continue to fall, you may be eligible to refinance your current debt at a lower interest rate. The impact of this could be huge, as paying a lower interest rate could end up saving you a significant amount of money. Next, make a plan as to how you will fully pay off these debts in a reasonable amount of time. This might require looking back at your budget and determining areas where you could spend a little less money to use on debt payments.
Save until you have a 6-month emergency fund
The best time to secure your emergency fund was yesterday, but the second-best time is today. Having an emergency fund is of the utmost importance, especially since you have no idea what could happen this year, whether it be an unexpected illness in the family, car trouble, or any other number of expenses. Your emergency fund acts as your life jacket in times of need. So, stop waiting around and get your emergency fund together right now!
Choose where to invest after you’ve built your emergency fund
Now that you’ve got your emergency fund in order, it’s time to invest. Just keeping your savings in a traditional checking or savings account is not only a waste; it actually could be costing you money each year due to inflation. Instead, let your money work for you and invest your savings to grow on a compounded basis over time. But where should you invest? There are traditional investment options like stocks and mutual funds, or you can opt for alternative investments like peer-to-peer loans. Whichever investment options you choose, make sure you do your research before you invest.
Diversify your investments
Head on over to your investment portfolio. Are your investments diversified? While you might have a wide range of stocks, ETFs, mutual funds, and the like, this doesn’t necessarily make for a well-diversified portfolio. Instead, you should look to diversify your investments into other areas. For instance, diversifying your portfolio in Bondora Go & Grow will provide you with a steady return on your investment in peer-to-peer loans with no lock-up period or minimum investment. This type of diversification now could pay off handsomely in the future.
Plan for the long-term: key life moments and retirement
Thinking about your finances for this year also means looking ahead to the future. What upcoming life events could create big expenses? Maybe your children are only a few years away from college, or you hope to get married soon. We know you can’t predict the future, but you can certainly determine what major expenses you might incur in the long-term.
You can also start planning for retirement, no matter your age. Retirement planning requires looking far into the future and calculating your projected future income, investment growth, and any expenses you might encounter along the way. Relax; you don’t have to have the entire picture complete to begin preparing for retirement now. The first step you can take is to think about your long-term goals and let them help inform your financial decisions this year.
One step closer to financial freedom
Let 2021 be the year where you take care of your body and mind and your wallet as well. Take this financial to-do list with you wherever you go so that you can always be reminded of the importance of maintaining your financial health when it’s most difficult. These tips will set you on the right path toward reducing your debts, increasing your savings, and putting you on the path toward financial freedom.
Find out how to reach financial freedom right here.