2021: Controlling Your Finances in the Year Ahead is certainly challenging given the year we have just lived through. You might find yourself trapped in a debt cycle or earning too little right now to maintain your ideal standard of living. Or perhaps you simply want to get a jump start on saving for a substantial financial goal such as retirement, buying a home, or investing we’re here to help.
Right now, while 2021 is new, is a wonderful time to get started. By following these strategies for taking control of your finances in 2021 by year’s end you should – or rather your bank balance should – be in much better shape.
2021: Controlling Your Finances in the Year Ahead
Start Budgeting NOW
The first step most people need to take when trying to get a real handle on their finances is to create a budget—a solid plan for how to spend your money each month that is based on how much you typically earn and spend. A budget is often the best tool you can use to change your financial future for the better.
To start, write down your income and all your expenses, and then subtract the expenses from the income to determine your discretionary spending, as in how much you have to spend on (technically) whatever you like.
At the start of each month, set up a budget to allocate how discretionary funds get spent. Track the spending over the course of the month, and at the end of the month, determine whether you stuck to the budget.
If you spent more than you made, fix your budget by cutting unnecessary expenses or finding ways to earn more. Implement the revised budget the next month to start living within your means.
2021: Controlling Your Finances in the Year Ahead
Cut Down on Non-Essential Spending
Cutting your monthly expenses is one of the simplest things you can do to gain control of your finances in 2021.
While you may not be able to reduce some fixed costs, such as mortgage or car payments, by being flexible and thinking frugally, you may reduce variable costs, such as clothes or entertainment, without dramatically changing your lifestyle.
For example, to lower your energy costs, you can minimize power usage, to save on clothing, shop at thrift stores or via an online thrifting site like the ones listed here, choose different companies for your home or life insurance, or buy your food at a discount at bulk stores like Big Save.
2021: Controlling Your Finances in the Year Ahead
Pay Your Debts (Faster)
Carrying a lot of debt, especially high-interest credit card debt, is one of the costliest mistakes you can make. Pay off your debt as soon as possible if you want to change your financial profile in 2021 to create a rosier picture for 2022.
Start by listing all your current debts, whether it’s credit card debt, student loan debt, or a car loan, and figuring out the minimum amount you owe each debt to stay current. Simply paying the minimum amount will not easily get you out of debt, so calculate your fixed expenses and decide how much you will allocate to debt reduction from your discretionary spending budget.
You can help yourself out here by asking the lender for a lower rate, consolidating several loans into one debt, or converting high-interest credit card debt to a low-interest credit card such as a balance transfer card. Then, to pay off the debt as soon as possible, set up a debt payment schedule and follow sound spending habits.
2021: Controlling Your Finances in the Year Ahead
Start to Save Every Week
Like investing, saving is another passive, but more incremental, path to increasing your personal wealth. Open and direct cash into interest-bearing savings accounts on a regular basis to take control of your finances right now (every week, month, or a certain time of year, for example).
This could be cash that you save each month on your shopping budget, a fixed sum that you put away from each paycheck, or an amount that you allocated to save each month in your budget.
Look for ways to increase your savings over time, no matter which choice you choose, and no matter how little you save. In the long run, small gains will amount to big returns.
2021: Controlling Your Finances in the Year Ahead
Get a Financial Plan
To really take control of your finances in 2021 and achieve specific goals, a financial plan is a must. In short, this is an outline of the financial timeline for the major milestones in your life.
It is similar to a budget, but it spans a longer time period of 10, 20, or 30 years down the line, while as it is only for the weeks or months to come, a budget is a short-term plan. The two function hand in hand, so a budget should always be part of a broader financial plan.
Events like buying a home, planning for retirement, and paying for the education of your children should be included in your financial strategy. Take the time to set these financial goals, so that you are aware every month working towards. If you don’t have concrete things you’re working for, every month you will have trouble motivating yourself to keep saving or investing.
Finally, over time, track your objectives, so you can see how much you have achieved by the time 2022 rolls around! For further professional help and advice speak to one of our Independent Financial Advisors and professionally put a plan in place to ensure your financial future.
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