06 Jan 7 Easy Ways to Jumpstart Your Financial Goals in 2021
So, you’re ready to set big financial goals in 2021. Good for you!
If 2020 taught us anything, it taught us that life can change overnight.
Millions of Americans found themselves out of a job and struggling to make ends meet due to the lockdowns.
And yet, the forced quarantines taught Americans to spend less and save more.
According to CNBC, “The personal savings rate hit a historic 33% in April […] by far the highest level of saving since the [U.S. Bureau of Economic Analysis] department started tracking data in the 1960s.”
If your financial situation in 2020 was a wake-up call or you simply recognized you finally need to put valuable financial tips to good use, 2021 is your year.
If your New Year’s resolutions included financial goals in 2021, you’re not alone.
Check out these findings from Fidelity Investments’ 2020 New Year Financial Resolutions Study:
- 67% are considering a financial resolution for the new year.
- 53% plan to save more money.
- 51% plan to pay down debt.
- 35% plan to spend less money.
However, much as the full gyms in January are empty by February, many people will fail to stick with their resolutions and won’t achieve their financial goals in 2021.
But not you, friend!
You will be one of the success stories…if you apply these financial tips to start 2021 on the right foot.
#1 Set Goals for Success
One key to achieving your financial goals in 2021 is to set goals that are worthwhile and realistic.
Your goals need to be worthwhile. Your goals should have a clear purpose and one that is worth celebrating once achieved.
Rather than setting a vague financial goal (“save money”), set goals that are specific (“save $1,000 in my emergency fund”).
In addition, your goals also need to be realistic.
Don’t set yourself up to fail and set a goal to save an unachievable amount of money.
After you have defined your year-end financial goals in 2021, break these goals down into quarterly and monthly goals.
It is much easier to see the light at the end of the tunnel the closer you are to reaching your goals.
For example, when people make a resolution to lose weight, each milestone is a victory and pushes them closer to the final goal.
If they plan to lose 20 pounds and only focus on that number, they will feel defeated and may give up.
However, if they set a goal to lose 5 pounds every quarter, this feels much more doable.
The same is true for setting financial goals for success.
[Related Read: How to Set Financial Goals for 2021 and Stick with Them]
#2 Create a Budget and Stick to It
One of the best financial tips is to create a budget and stick to it.
CNBC reports, “On average, the weekly amount that people spend — not including bills like mortgage or rent, utilities, etc. — is $340, or $143 more than the average $197 budgeted. That extra spending equals roughly $7,400 each year.”
Don’t let this happen to you.
Instead, create a realistic budget based on your income, spending habits, and financial goals in 2021.
Fortunately, it is easier than ever before to budget with all the tools and apps available.
For example, Mint monitors your spending, creates budgets based on how much you should (not want to) be spending, limits your spending in certain budget categories, and sends you notifications when you go over budget.
[Related Read: 7 Best Budgeting Apps for Side Hustlers]
#3 Pay Yourself First
One of the most powerful financial tips I can give you is to pay yourself first.
Paying yourself first is as simple as taking money from each paycheck and putting it toward savings first – before you pay the electric company, buy groceries, etc.
Make 2021 the year you prioritize fully funding your emergency fund and your retirement accounts.
If you feel tempted to pay yourself last, automate savings to be pulled from each paycheck. This way you don’t have the opportunity to spend the money elsewhere.
#4 Contribute More to Retirement Savings
As you hustle for your retirement, a great financial goal in 2021 is to fund even more in retirement savings.
Here are some great ways to jumpstart retirement savings:
- If your employer offers to match 401(k) contributions, make a goal to contribute at least enough to take advantage of the company match.
- Set a goal to contribute the maximum amount allowed for the year (or get as close to it as you can). Employee 401(k) contribution limits in 2021 will stay the same as 2020 – at $19,500. Keep in mind, those age 50 years and older can contribute an additional $6,500 for 2021 (a catch-up contribution).
- If you get a raise in 2021, up the amount you contribute toward retirement rather than upping your lifestyle.
- Put bonuses and financial gifts toward your retirement savings.
- Open an IRA (Individual Retirement Account). For 2021, you can contribute $6,000, with an additional $1,000 catch-up contribution if you’re 50 or older.
Want proof these financial tips work?
According to Mint, “The number of Fidelity 401(k) plans with a balance of $1 million or more in 2019 increased 35% year over year” and Fidelity also reported, “The number of 401(k) and IRA millionaires increased.”
#5 Refinance Your Home
There has never been a better time to refinance your home – and I’m not exaggerating.
The average interest rate on the popular 30-year fixed mortgage hit multiple record lows in 2020.
The rates continue to remain low, with experts predicting 2.9% to 3.4% rates in 2021.
According to CNBC, “These borrowers can save an average of $309 per month by refinancing, for an aggregate $5.98 billion in potential monthly savings, also the most in history.”
Let’s run the numbers.
You have a $200,000 mortgage with a 4.25% rate.
You refinance at a 3% rate.
Your monthly payment drops $140 a month – and $88,000 over the 30-year loan term.
That is huge savings!
I’m taking advantage of it, but I’m going a step farther.
In January, I plan to refinance my home and drop my remaining 26 years to a 15-year loan term.
Not only is this possible, but it is also financially wise.
However, many Americans that qualify have not taken the steps to refinance.
Greg McBride, Bankrate chief financial analyst claims, “Millions of homeowners could be missing out on tens of thousands of dollars in savings by not refinancing their mortgages at this year’s record low rates […] Roughly 8 in 10 homeowners with a mortgage have not refinanced and more than 1-in-4 doesn’t even know what rate they’re paying.”
Don’t become one of these statistics and lose out.
If you haven’t taken advantage of these historically low rates, now is the time.
#6 Trim the Fat
The quickest way to jumpstart achieving your financial goals in 2021 is to make cuts today.
Most of us spend money that we don’t really need to spend.
For example, how many streaming subscriptions does one person really need?
Look through all the subscriptions and services you are paying for (for example, streaming, gym memberships, grocery services).
If you come across ones you don’t use (or seldom use), it’s time to say goodbye.
Another way to save money fast is to shop around for better home and car insurance rates.
According to Nerd Wallet, “While it may be tempting to sit tight with your current provider, one analysis found that you could save an average of $560 by switching.”
Contact your utility companies and see if you can renegotiate for better rates.
Just remember – whatever you save by cutting subscriptions or lowering rates doesn’t go toward spending.
It goes toward reaching financial goals in 2021.
#7 Review Your Financial Goals in 2021 Monthly and Quarterly
When people make resolutions to lose weight, they don’t ignore the scale. They monitor their progress on a regular basis.
You should do the same with your financial goals in 2021.
Monitor your spending and saving regularly.
Review your progress at the end of the month to see how close you came to meeting your monthly goal.
At the end of each quarter, review and reassess.
If one area of your budget demands more and another area demands less, make adjustments.
If you made some financial mistakes, don’t beat yourself up.
Give yourself grace and find ways to catch up in the next quarter.
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